 # Effective amount of stock p115, book 4

To calculate this Schweser has the following forumla = (number of contracts) x (multiplier) / (1 + dividend yield) ^ t Why is this not also divided by the risk free rate given the relationship between future price and stock price? Many thanks if anyone can help.

search the forum. its not divided by the risk free rate cuz futures earn Rf but stock units earn the dividend yeild. its better explained in previous posts i’ve made on this topic.

I did search, but couldn’t find anything. Do you have a link?

nope - i’m going to search, haha. try this visulazation. futures prices are based on risk free rates. stock prices (simplified) are based on dividend yeild. you invest X units of stock today at a certain reinvested dividend yeidl to get Y units in the future. that Y units of stock in the future is (number of contracts) x (multiplier)

I found this which explains it: number of shares: (# of contracts x multiplier) / (1+ div yield) ^t Dollar amount of shares: (# of contracts x multiplier x Futures Price) / (1+ Rf) ^t I was missing the difference between dollars and number of contracts. Thanks for your help.