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Q1 IsitpossibletomakeagainiftheKLSECIfuturespriceislowerthanthetheoreticalfairpricegivenbythecostofholdingstock?Ifso,describethestrategyatradercoulduseinthissituation. Q2 AssumeitisnowJanuary2020andtheKLSEcompositeindexisat1146.Therisk-freeinterestrateis5%p.a.TheweightedaveragedividendyieldoftheKLSEcompositeindexis2.3%p.a.WhatwouldbethefairvalueoftheJune2020KLSECIfuturescontract?Maturityis6months. Twoanswerarerequired.First,assumethattheinterestiscontinuouscompoundingandthesecond,interestrateisassumenon-continuouscompounding(i.e.simpleinterest). Q3 Assumeaninvestortakesalongpositionin2SeptemberKLSECIfuturescontracton17thJuly.ThefuturescontractpriceisRM1613.00TheinitialmarginandmaintenancemarginareRM6,000/contractandRM4,000.00/contractrespectively.Thetradercloseshispositiononthefifthday.Thefuturessettlementpricesduringthosefivedaysare: Day1RM1611.00 Day2RM1615.00 Day3RM1620.00 Day4RM1610.00 Day5RM1608.00 ThecontractsizeisRM50/contract. a.Determinethetrader'stotalgainsorlosses. b.Howmuchdoesthetraderpay(ifany)formargincall?

Q1

IsitpossibletomakeagainiftheKLSECIfuturespriceislowerthanthetheoretical"fair"pricegivenbythecostofholdingstock?Ifso,describethestrategyatradercoulduseinthissituation.

Q2

AssumeitisnowJanuary2020andtheKLSEcompositeindexisat1146.Therisk-freeinterestrateis5%p.a.TheweightedaveragedividendyieldoftheKLSEcompositeindexis2.3%p.a.WhatwouldbethefairvalueoftheJune2020KLSECIfuturescontract?Maturityis6months.

Twoanswerarerequired.First,assumethattheinterestiscontinuouscompoundingandthesecond,interestrateisassumenon-continuouscompounding(i.e.simpleinterest).

Q3

Assumeaninvestortakesalongpositionin2SeptemberKLSECIfuturescontracton17thJuly.ThefuturescontractpriceisRM1613.00TheinitialmarginandmaintenancemarginareRM6,000/contractandRM4,000.00/contractrespectively.Thetradercloseshispositiononthefifthday.Thefuturessettlementpricesduringthosefivedaysare:

Day1RM1611.00

Day2RM1615.00

Day3RM1620.00

Day4RM1610.00

Day5RM1608.00

ThecontractsizeisRM50/contract.

a.Determinethetrader'stotalgainsorlosses.

b.Howmuchdoesthetraderpay(ifany)for"margincall"?

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