Problem $22-14($Algo$)$

The multiplier for a futures contract on a stock market index is $$80.$ The maturity of the contract is one year, the current level of the index is $$5,100,$ and the risk$-$free interest rate is $0\mathrm{.}4\%$ per month. The dividend yield on the index is $0\mathrm{.}1\%$ per month. Suppose that after one month, the stock index is at $5,150.$

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Required:

a$.$ Find the cash flow from the mark$-$to$-$market proceeds on the contract. Assume that the parity condition always holds exactly.

References

b$.$ Find the holding$-$period return if the initial margin on the contract is $$10,600.$