Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tori Reynolds has been an avid stock market investor for years. She manages her portfolio fairly aggressively and likes to short-sell whenever the opportunity presents

Tori Reynolds has been an avid stock market investor for years. She manages her portfolio fairly aggressively and likes to short-sell whenever the opportunity presents itself. Recently, she has become fascinated with stock-index futures, especially the idea of being able to play the market as a whole. Tori thinks the market is headed down, and she decides to short sell some S&P 500 stock-index futures. Assume she shorts 3 contracts at 1,353.46 and has to make a margin deposit of S19,246 for each contract. How much profit will she make, and what will her return on invested capital be if the market does indeed drop so that the CME contracts are trading at 1,303.16 by the time they expire? (The multiple on one S&P 500 Index future contract is $250.)

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_2

Step: 3

blur-text-image_3

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

Fundamentals Of Multinational Finance

Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman

1st Edition

0201844842, 978-0201844849

More Books

Students also viewed these Finance questions