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The one-year futures price on a particular stock-index portfolio is 1,610, the stock index currently is 1,600, the one-year risk-free interest rate is 2.0%, and the year-end dividend that will be paid on a $1,600 investment in the index portfolio is $15. By how much is the contract mispriced? (Input the amount as positive value.)
The futures price is $_ _ _, its "proper" or parity value.

Answer :

The one-year futures price on a particular stock-index portfolio is 1,610. The calculated parity value is $ 1,610.

An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of financial market indices. Index funds have lower costs and fees than actively managed funds. Index funds follow a passive investment strategy.

Calculating the problem:

F= 1610 x 1.04 - 22

    = $1652.4

Actual F0 is 2,365, so the future price is $5 below its proper or parity value.

A portfolio is a living and changing collection of records that reflects your achievements, skills, experiences, and attributes. We'll highlight some examples of your best work, along with your life experiences, values, and accomplishments.

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