Explanation

Using the carry arbitrage model for futures pricing with continuous compounding:

Formula: $F_0 = S_0 \times e^{(r - \delta)T}$

Where:

• $F_0$ = Futures price
• $S_0$ = Spot price = 7,725
• $r$ = Risk-free rate = 3.95% = 0.0395
• $\delta$ = Dividend yield = 3.75% = 0.0375
• $T$ = Time to expiration = 6 months = 0.5 years

Calculation: $F_0 = 7,725 \times e^{(0.0395 - 0.0375) \times 0.5}$ $F_0 = 7,725 \times e^{0.002 \times 0.5}$ $F_0 = 7,725 \times e^{0.001}$ $F_0 = 7,725 \times 1.001001$ $F_0 = 7,732.73$

The calculated futures price of 7,732.73 is closest to 7,733 (Option B).