The multiplier for a futures contract on a stock market index is $250. The maturity of the

Question:

The multiplier for a futures contract on a stock market index is $250. The of the contract is 1 year, the current level of the index is 1,300, and the risk-free interest rate is .5% per month. The yield on the index is .2% per month. Suppose that after 1 month, the stock index is at 1,320.
a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.
b. Find the holding-period return if the initial margin on the contract is $13,000.

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