Need help with a question about finance

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Bear Blu
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Joined: Sun Jan 13, 2019 2:03 am

Need help with a question about finance

Post by Bear Blu » Sun Jan 13, 2019 5:33 am

Suppose you purchase a futures contract on the S&P 500. If the index is currently at 1525, the dividend yield is 3.5%, the treasury bill yield is 6.5%, and the time to settlement (maturity) is six months. What is the futures price for this contract?
What do these words mean?

P.S. It's my little brother's homework, usually I can help him out but this one is hard.

ALEX
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Joined: Sat Jan 12, 2019 8:07 am

Re: Need help with a question about finance

Post by ALEX » Sun Jan 13, 2019 5:34 am

Is it the expected yield after six months?

And have you googled these terms? Like "dividend"? And have you browsed over this?

https://en.wikipedia.org/wiki/Futures_contract

And do you have a textbook to refer to? What are you quoting?

Adriel
Posts: 33
Joined: Sat Jan 12, 2019 9:23 am

Re: Need help with a question about finance

Post by Adriel » Sun Jan 13, 2019 5:34 am

It has to be just some compound interest calculations. It's going to be the expected return on your investment over six months.

I don't know how the treasury bill yield is related.

Bear Blu
Posts: 27
Joined: Sun Jan 13, 2019 2:03 am

Re: Need help with a question about finance

Post by Bear Blu » Sun Jan 13, 2019 5:35 am

ALEX wrote:
Sun Jan 13, 2019 5:34 am
Is it the expected yield after six months?

And have you googled these terms? Like "dividend"? And have you browsed over this?

https://en.wikipedia.org/wiki/Futures_contract

And do you have a textbook to refer to? What are you quoting?
Hmm...

I thought maybe there was some formula for pricing futures contracts where you just plug in the known values but I couldn't really find anything immediately.

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