Suppose that the value of the S&P 500 stock index is 4,000.

a. If each E-mini futures contract (with a contract multiplier of $50) costs $25 to trade with a discount broker, how much is the transaction cost per dollar of stock controlled by the futures contract?

b. If the average price of a share on the NYSE is about $40, how much is the transaction cost per “typical share” controlled by one futures contract?

c. For small investors, a typical transaction cost (including the bid-ask spread) for direct trades in stocks might be about 5 cents per share. How many times the transactions costs in futures markets is this?

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