a. The maturity of a futures contract on a stock market index is 4 months. The multiplier for the futures contract $250. The current level of the index is 32,000. The risk-free rate is 0.6% per month and dividend yield on the stock market index is 0.3% per month. The initial margin requirement is 10%.

i. What is the parity value of the futures price now? (3 marks)

ii. Assume the futures contract is fairly priced. How much initial margin you need to deposit if you long 5 contracts? (2 marks)

iii. Calculate the one-month holding-period return for your long position in the futures contract if the stock market index increases to 33,000 one month later. Assume the futures contract keeps being priced fairly. (5 marks)