12.

ABC common stock has a price of $50 and is expected to pay a dividend of $0.50 per share in 1 month and 4 months.

The S&P 500 stock index is 4,000. The dividend yield on the index is 2% on a continuously compounded basis.

The risk free interest rate in Switzerland is 3% per annum with continuous compounding and the spot price of the Swiss franc is $0.9900.

A futures contract on ABC stock has a time to the delivery date of 5 months, a delivery price of $50 and a size of 1,000 shares.

A futures contract on the S&P 500 stock index has a delivery date in 5 months, a delivery price of 3,800, and a size of 250 times the index.

A futures contract on the Swiss franc has a delivery date in 5 months, a delivery price of $1.0500 and a size of 62,500 Swiss francs.

All prices are in U. S. dollars. The U. S. dollar risk free rate is 4% continuously compounded.

Consider the following statements.

Statement I. The value of a short position in one futures contract on ABC stock is (close to) -$165.

Statement II. The value of a short position in one futures contract on the S&P500 stock index is (close to) $57,403.

Statement III. The value of a short position in one futures contract on Swiss francs is (close to) $3,434.

Which of the following is correct?

a.

Statement I is correct, Statements II and III are incorrect.

b.

Statements I, II and III are correct.

c.

Statement II is correct, Statements I and III are incorrect.

d.

Statement III is correct, Statements I and II are incorrect.

e.

Statements I, II and III are incorrect.