Index Z, a price-weighted index, is comprise of two stocks

| June 4, 2016

Question
Index Z, a price-weighted index, is comprise of two stocks. The current price of stock #1 is $100. Stock #1 has a dividend payment of $1.25 that can be invested for 50 days at 10 percent simple interest. Assume there are 360 days per year. The current price of stock #2 is $90. Stock #2 has a dividend payment of $0.75 that can be invested for 30 days at the same 10 percent simple interest. The index futures contract expires in 80 days. What is the cost of buying the stocks and carrying them to the future?

a.
$172.19

b.
$182.19

c.
$192.19

d.
$202.19

e.
None of the above

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