- CFA Exams
- CFA Level I Exam
- Study Session 16. Derivatives
- Reading 49. Basics of Derivative Pricing and Valuation
- Subject 3. Pricing and Valuation of Forward Contracts

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**CFA Practice Question**

What must the 3-month futures price be on a stock that has a dividend yield of 2% when the current price of the stock is $50 and the risk-free rate is 5%?

A. $51.5

B. $50

C. $50.37

**Explanation:**The 3-month futures price should be $50 (1 + 0.05 - 0.02)

^{0.25}= 50.37.

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**User Contributed Comments**
2

User |
Comment |
---|---|

Alexalee |
please help: why not (50+1/(1.05)*0.25))(1.05)*0.25 =(50+0.99)*1.0123=51.62???? (So+PVof div)*(1+r)*t?? thx |

maxsouto |
Alexalee: I think that would mean you are compounding 4 times a year |