1 .The hedge ratio of an at -the- money call option at IBM is .4. the hedge ratio of an at- the- money put option is -6. What is the hedge ratio of an at -the -money straddle position at IBM?

2. On January 1, you sold you sold one march maturity S&P 500 index futures contract at a future price of $1200. if the future price is $1250 on February 1 what is your profit? The contract multiplier is $2.50.

3. Suppose the value of the S&P 500 stock index is currently $1200. If one year T-bill rate is 3% and the expected dividend yield on the S&P 500 is 2%, what should be one year maturity futures price be? What if the T-bill rate is less than the dividend yield, for example 1%?

4. A single stock future contract on a nondividend -paying stock with current price$150 has a maturity of one year. If the T-bill rate is 3% what should the futures price be?

a. What should the future price be if the maturity of the contract is three years?

b. What if the interest rate is 5% and the maturity of the contract is three years?

5. the margin requirement on the S&P 500 future contract is 10%, and the stock index is currently $1200. each contract has a multiplier of $250. How much margin must be put up for each contract sold. if the future price falls by 1%, to $1,188, what will happen to margin account of an investor who holds one contract? What will be the investor's percentage return based on the amount put up as margin?