One Chicago has just introduced a new single-stock futures contract on the stock of Brandex, a company

Question:

One Chicago has just introduced a new single-stock futures contract on the stock of Brandex, 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 stock 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?

LO.1

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Essentials Of Investments

ISBN: 9780697789945

8th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

See More Books

Question Posted: Jul 26, 2024 02:02 PM

See More Questions

a. Firm A has a margin of 14%, sales of $640,000, and ROI of 18%. Calculate the firm's average total assets. b. Firm B has net income of $72,000, asset turnover of 1.40, and average total assets of...
Boeing Company is the largest manufacturer of commercial aircraft in the United States and is a major employer in Seattle, Washington. Explain why each of the following individuals or organizations...
Upon graduation, you are hired by Pullman Corporation, a manufacturer of accessories for luxury cars. Management wants you to conduct research to locate foreign markets with the best sales potential....
Input/output control is especially important at a firm that uses just-in-time (JIT) systems. a. True b. False
Brian Felley went to the home of Tom and Cheryl Singleton on June 8 to look at a used car that the Singletons had advertised for sale in the local paper. The car was a 1991 Ford with 126,000 miles on...
Harrison holdings INC us a publicly traded with a current share price ot $ 3 9 per share. Harrison Holdings. I nc. (HHI) is publidy traded, wtth a current share S 39 per share _ H HI hag 22 wea As S...
The multiplier for a futures contract on the stock market index is $250. The maturity of the contract is one year, the current level of the index is 800, and the risk-free interest rate is .5% per...
The Excel Application box in the chapter (available at www.mhhe.com/bkm; link to Chapter 17 material) shows how to use the spot-futures parity relationship to find a term structure of futures prices,...
Two-dimensional scattering theory. By analogy with Section 10.2, develop partial wave analysis for two dimensions. (a) In polar coordinates (r,) the Laplacian is Find the separable solutions to the...
What is the purpose of the coaches legal duty to warn of inherent risks?
Write a complete Java application program to do the followings: Question 1: Write a program that accepts input from user, i.e., name, age, hometown, state and mobile number. Then display an output...
For each probability and percentile problem, draw the picture. Let X ~ Exp(0.1). Part (a) Part (b) Part (c) Part (d) Sketch a new graph, shade the area corresponding to P(X <5), and find the...
Describe how health care reform initiatives and mandates have impacted your organization. What changes in operations have been made in response to these initiatives? How well-organized were these...
R E + Y C'(s) P(s) Figure 1: Unity-Feedback System Design Objectives: Find a controller C(s) such that the following are satisfied: i) The closed-loop system is stable. = ii) The steady-state error...
a. Show that Theorem 5-5 is false if M is not required to be compact. b. Show that Theorem 5-5 holds for noncom-pact M provided that w vanishes outside of a compact subset of M.
Write a paper about medication error system 2016.

One Chicago has just introduced a new single-stock futures contract on the stock of Brandex, a company

Question:

Step by Step Answer:

Essentials Of Investments

Students also viewed these Business questions