Compute the ‘fair’ value of the two nearest to expiration futures contracts on the S&P500 Index (SPX) using SPX as the underlying asset Answer the following questions:a. What interest rate and...

Compute the ‘fair’ value of the two nearest to expiration futures contracts on the S&P500
Index (SPX) using SPX as the underlying asset Answer the following questions:
Answer:
The nearest expiring options are:
1) March 2017
2) June 2017
S&P 500 cash value that is closing price = 2,395.96
Refer: http://finance.yahoo.com/quote/%5EGSPC?p=^GSPC
Interest rate = 2.43%
Dividend yield = 1.91%
Dividend point = 1.91%*2395.96
= 45.76
March 2017 expires on 22
nd
March 2017 – Days to expiration = 21
June 2017 expires on 21
st
June 2017 – Days to expiration = 80
Fair value for March 2017 = S&P 500 [1+r (x/360)] – Dividends
= 2,395.96*[1+2.43%*(21/360)]-45.76
= 2,353.60
Fair value for June 2017 = S&P 500 [1+r (x/360)] – Dividends
= 2,395.96*[1+2.43%*(80/360)]-45.76
...