Creating appropriate butterfly spread

Reference no: EM1310630

Q1) Assume that present level of S&P 500 index is 900, and annual dividend yield on index is 1.5%. Treasury bills yield 5% per annum. Both rates are continuously compounded. Determine theoretical price of the S&P 500 futures contract with delivery in two months?

Q2) Assume you are expecting BCE stock to move substantially over next 3 months. You are considering butterfly spread. Present price of BCE stock is= $40 per share. Three-month European call options on BCE stock, with strike prices of= $30, $40 and $50, cost $7, $3 , and $2, respectively. Create an appropriate butterfly spread.

Reference no: EM1310630

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