Question
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
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 0.4% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 2,020. 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 $15,000. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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