You are interested in buying Index Futures Contract on Dow Jones Industrial Average DJIA and will use the DJ industrial average index. You want to see if you can profit on the spread between the Futures index which expires in September 2015 and the DJIA cash index.

A) Assume on Thursday May, 14, 2015 you had purchsed in cash an equal number of shares in all of 30 companies which comprise the DJIA Cash Index at a total cost of 4,151,500. The DJIA cash index stood at 18,050 when you purchased these 30 stocks.

b) The mini DJ industrial average index futures contract was 18,122 for the September Contract. Thus the spread was 72 points: DJIA Futures Index 18,122---DJIA Cash Index 18,050=72 Because of this spread you sell short 46 Mini DJ industrial Aveage Future Contracts and will close your short postion on Setempber,? 2015.

c) you will also sell 4,226,480 on Sept ?, 2015, all of the shares you had pruchased in May 14, 2015. Suppose the DJIA cash index closes att 18,376 on Sept ?, 2015.

d) Complete the timeline below and use the =XIRR function in Excel to compute the Return in Percentage Rate Format (e.g 0.0382=3.82%)

*Provide the exact (?) date Sept 2015 when the future contract expires:__________

$__________Sell DJIA stocks $_________Short Sale Mini DJIA futures

@___% $____________Purchase DJIA stocks $____________Close short sale Mini DJIA futures

Net Cash Flows:$___________ $____________

PLEASE FILL IN BLANKS TO THE BEST OF YOUR ABILITY.