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Show work. A portfolio manager expects to receive funds from a new client in 30 days. These funds are to be invested in a basket of equities. He decides to take a long position in 30-day forward contracts on the S&P 500 stock index to hedge against an increase in equity prices. The index is currently at 2,440. The continuously compounded dividend yield on the index is 1.90%, and the continuously-compounded risk-free rate is 2%. Assuming a 365-day year, what is the forward price on the index?

A. $2,440.00 B. $2,440.20 C. $2,440.80 D. none of the above.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92394362

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