Relationship between dividend yield and risk free rate

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Assume that we are pricing a four month contract on the S & P 500 index that provides a continuous dividend yield of 2.8% per annum. Its current index value is 436.00. The risk free rate is currently 3.5% per annum. Is the no-arbitrage futures price equal to spot? Explain considering the relationship between dividend yield and risk free rate. When would the futures price equal spot? Explain.

Reference no: EM131978482

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