The Excel Applications box in the chapter (available at www.mhhe.com/bkm; link to Chapter 17 material) shows how to use the spot-futures parity relationship to find a “term structure of futures prices,” that is, futures prices for various maturity dates.
- Suppose that today is January 1, 2012. Assume the interest rate is 1% per year and a stock index currently at 1,200 pays a dividend yield of 2%. Find the futures price for contract maturity dates of February 14, 2012, May 21, 2012, and November 18, 2012.
- What happens to the term structure of futures prices if the dividend yield is lower than the risk-free rate? For example, what if the interest rate is 3%?