1. The S&P 500 Index is priced at $1984. The continuously compounded annualized dividend yield on the index is 2.30%. The continuously compounded annual interest rate is 1.20%. What is the price of a forward contract that expires 9 months from today?
A. $1973.12
B. $2000.44
C. $1967.70
D. $1994.94
2. The S&P 500 Index price is $1975.12 and its annualized dividend yield is 2.20%. The annual LIBOR is 3.5% and is refered as the benchmark interest rate. Assuming annual compounding, how many futures contracts will you need to hedge a $30 million portfolio with a beta of 0.95 for one year?
A. 56
B. 59
C. 61
D. 57