FinTrade has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no

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FinTrade has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 6% per year.

a. If Brandex stock now sells at $120 per share, what should the futures price be?

b. If the Brandex price drops by 3%, what will be the change in the futures price and the change in the investor’s margin account?

c. If the margin on the contract is $12,000, what is the percentage return on the investor’s position? P-636

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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Question Posted: Jul 31, 2024 05:01 AM

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ISE Investments

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