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Forward contract

index level 14780
index continously compounded dividend yield 2.76%
discrete risk free rate 5.5%
compute 6 months forward contract

a. 14992
b. 14981
c. 15582

14981

CP

TOP

14780 * ex (.055-.0276)*.5= 14983.88

b

TOP

0.055 is wrong... since it is a discrete rate - you need to "continuify" it.

you need to do

ln (1.055) = 0.0535

and use that.

if the numbers are closer than what is provided, it could make a difference to your answer.

CP

TOP

I see. Thanks CP.

TOP

yes B as per CPs explanation

TOP

rounding.... I too am getting 14972 ...

CP

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