On March 15 the cash SP500 is priced 1000. The SP500 futures contract which matures...
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On March 15 the cash SP500 is priced 1000. The SP500 futures contract which matures 9 months later in December has a price of 1200. The risk-free interest rate over this 9-month period is 5% while the dividend yield is 3%.
Would an investor be better of investing his money in the spot SP500 or buying the futures contract on this index?
| it cannot be determined since the price of the of futures contract and the price of the spot in December is not known on March 15
| ||
| better to invest in the spot market
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| better to invest in the futures market only if it increases more than the spot market over this 9-month period
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| better to invest in the spot market only if it increases more than the futures market over this 9-month period
| ||
| better to invest in the futures market
|
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