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Question 8 The December 2022 S&P 500 cash index is 3980 while the S&P 500 futures index is 4000 and the contract value of each
Question 8 The December 2022 S&P 500 cash index is 3980 while the S&P 500 futures index is 4000 and the contract value of each index point on the futures is $100. You are convinced the cash index will rise 10% by expiry. You are only prepared to buy or sell one futures contract. (i) Will you buy or sell a contract in the futures market? (2 marks) (ii) What is your profit (+) in dollars if you are correct? Show your calculations. (2 marks) (iii) What is your prot (+)/loss (-) if the cash index on expiration is 4200? Show your calculations. (2 marks) (iv) What is your profit (+)/loss (-) if the cash index on expiration is 3500? Show your calculations. (2 marks) (v) Explain what is meant by \"variation\" margin on a futures contract. (2 marks)
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