Question

The margin requirement on the S&P 500 futures contract is
8%, and the stock index is currently 2,000. Each contract has a
multiplier of $50.

**a.** How much margin must be put up for each
contract sold?

**b.** If the futures price falls by 2% to 1,960, what
will happen to the margin account of an investor who holds one
contract? **(Input the amount as a positive
value.)**

**c-1.** What will be the investor's percentage return
based on the amount put up as margin? **(Negative value
should be indicated by a minus sign. Round your answer to 2 decimal
places.)**

Answer #1

Suppose the S&P 500 index futures price is currently 1000.
One contract of S&P 500 index futures has a size of $250×
S&P 500 index. You wish to purchase four contracts of futures
on margin. Suppose that the initial margin is 10%. Your position is
marked to market daily. The interest earnings from the margin
account can be ignored.
(A) What is the notional value of your position?
(B) What is the dollar amount of initial margin?
(C) What is...

\One Chicago has just introduced a new single stock futures
contract on the stock of Brandex, a company that currently pays no
dividends. Each contract calls for delivery of 2,000 shares of
stock in one year. The T-bill rate is 5% per year.
a. If Brandex stock now sells at $220 per share,
what should the futures price be? (Round your answer to 2
decimal places.)
Futures price
b. If the Brandex stock price drops by 1.0%, what
will be...

One Chicago has just introduced a new single stock futures
contract on the stock of Brandex, a company that currently pays no
dividends. Each contract calls for delivery of 2,000 shares of
stock in one year. The T-bill rate is 3% per year.
a. If Brandex stock now sells at $230 per share,
what should the futures price be? (Round your answer to 2
decimal places.)
b. If the Brandex stock price drops by 1.0%, what
will be the change...

On January 1, you sell one April S&P 500 Index futures
contract at a futures price of 2,300. If the April futures price is
2,400 on February 1, your profit would be __________ if you close
your position. (The contract multiplier is 250.)
A)
$12,500 B) -$25,000 C) $25,000 D) -$12,500
The current level of the S&P 500 index is 2,350. The
dividend yield on the S&P 500 is 2%. The risk-free interest
rate is 5%with continuous compounding. The futures price quote for
a contract on...

The multiplier for a futures contract on a stock market index is
$250. The maturity of the contract is three months, and the current
level of the index is 3,350. The risk-free interest rate is 0.4%
per month. The dividend yield on the index is 0.1% per month.
Suppose that after one month, the stock index is at 3,280.
1. Find the cash flow from the mark-to-market proceeds on the
contract. Assume that the parity condition always holds
exactly.
2....

OneChicago has just introduced a single-stock futures contract
on Brandex stock, a company that currently pays no dividends. Each
contract calls for delivery of 2,200 shares of stock in 1 year. The
T-bill rate is 6% per year.
a.
If Brandex stock now sells at $180 per share, what should the
futures price be? (Round your answer to 2 decimal places.
Omit the "$" sign in your response.)
Futures
price
$
b.
If the Brandex price drops...

a)On Dec. 4, 2019, the nearby S&P 500 contract was trading
at 3114.50. What was the total value represented by one S&P
contract as of the day of that close?
b) If you think the S&P index is likely to go up in the near
future, would you buy or sell an S&P futures contract?
c) Assume that in two weeks, the contract closes at 3200. What
would be the dollar amount of your profit or loss, given the action...

a)On Dec. 4, 2019, the nearby S&P 500 contract was trading
at 3114.50. What was the total value represented by one S&P
contract as of the day of that close?
b) If you think the S&P index is likely to go up in the near
future, would you buy or sell an S&P futures contract?
c) Assume that in two weeks, the contract closes at 3200. What
would be the dollar amount of your profit or loss, given the action...

Suppose the S&P 500 currently has a level of 960. One
contract of S&P 500 index futures has a size of $250× S&P
500 index. You wish to hedge an $800,000-portfolio that has a beta
of 1.2.
(A)In order to hedge the risk of your portfolio, should you long
the futures or short the futures? Why?
(B)How many S&P 500 futures contracts should you trade to
hedge your portfolio?

The S&P 500 Index is currently at 2,000. You manage a $15
million indexed equity portfolio. The S&P 500 futures contract
has a multiplier of $50.
a. If you are temporarily bearish on the stock market, how many
contracts should you sell to fully eliminate your exposure over the
next six months?
b. If T-bills pay 1.8% per six months and the semiannual
dividend yield is 1.6%, what is the parity value of the futures
price? (Do not round intermediate...

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