A forward contract for 4 months is entered into when a stock index is at 1000. If the risk free interest rate is 3% per year (with continuous compounding) and the dividend yield on the index is 2% per year, what is the futures price? After 1 month the index price is 980, what is the value of the futures agreement assuming the risk free rate with continuous compounding is now 5% (but the original dividend rate remains 2%) and the contract price is equal to $50 times the index value?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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A forward contract for 4 months is entered into when a stock index is at 1000. If the risk free interest rate is 3% per year (with continuous compounding) and the dividend yield on the index is 2% per year, what is the futures price? After 1 month the index price is 980, what is the value of the futures agreement assuming the risk free rate with continuous compounding is now 5% (but the original dividend rate remains 2%) and the contract price is equal to $50 times the index value? 

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