Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 2,000 shares of stock in one year. The T-bill rate is 4% per year. a. If Brandex stock now sells at $250 per share, what should the futures price be? (Round your answer to 2 decimal places.) Futures price $ b. If the Brandex stock price drops by 2.5%, what will be the change in the futures price and the change in the investor's margin account? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places c. If the margin on the contract is $50,000, what is the percentage return on the investor's position? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Percentage return %
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started