Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The multiplier for a futures contract on the stock - market index is $ 5 0 . The maturity of the contract is one year,

The multiplier for a futures contract on the stock-market index is $50. The maturity of the contract is one year, the current level of the index is 2,000, and the risk-free interest rate is 0.3% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 2,015.
Required:
a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Find the one-month holding-period return if the initial margin on the contract is $20,000.(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Information Systems Assurance

Authors: David C Chan

2nd Edition

150081458X, 9781500814588

More Books

Students also viewed these Finance questions

Question

LO2 Describe the various purposes of performance appraisals.

Answered: 1 week ago