According to the CME Group, the market price of the E-mini futures is $2,939.25. Each futures contract delivers 50 times the index. A long-only equity portfolio with a market value of USD $10,000,000 has a beta of 1.25. The portfolio manager is planning to increase market exposure such that the portfolio beta becomes 2.25. How many futures contracts should the manager long/short? 16 (a) Short 68 (b) Long 68 (c) Short 51 (d) Long 51

According to the CME Group, the market price of the E-mini futures is $2,939.25. Each futures contract delivers 50 times the index. A long-only equity portfolio with a market value of USD $10,000,000 has a beta of 1.25. The portfolio manager is planning to increase market exposure such that the portfolio beta becomes 2.25. How many futures contracts should the manager long/short? 16 (a) Short 68 (b) Long 68 (c) Short 51 (d) Long 51

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Find the price of an American call option on a futures if the current spot price is 30, the exercise price is 25, the futures price is 33.70, the risk-free interest rate is 6 percent, the spot asset can go up by 10 percent or down by 8 percent per period and the call expires in two periods, which is also when the futures expires. Show your working. A. 9.98 B. 8.70 C. 7.73 D. 8.22
The futures price of an asset is currently 80 and the risk-free rate is 4%. A six-month put on the futures with a strike price of 85 is currently worth 6.5. What is the value of a six-month call on the futures with a strike price of 85 if both the put and call are European? What is the range of possible values of the six-month call with a strike price of 85 if both put and call are American? Show all work and briefly discuss.
5. Suppose the one-year futures price on a stock-index portfolio is 1218, the stock index currently is 1200, the one-year risk-free interest rate is 3%, and the ybar-end dividend that will be paid on a $1,200 investment in the index portfolio is $15. a. By how much is the contract mispriced? b. Formulate a zero-net-investment arbitrage portfolio and show that you can lock in riskless profits equal to the futures mispricing. Assume a zero bid-ask spread in security and futures transactions. Now assume that if you short sell the stocks in the index portfolio, the proceeds are kept with the broker, and you do not receive any interest income of the funds. Is there still an arbitrage opportunity (assuming that you don't already own the shares in the index)? d. Given the short sale rules, what is the no-arbitrage band for the stock-futures price relationship? Specifically, how high and how low can the futures price be without giving rise to arbitrage opportunities. C.
Consider the call-put pair with strike price 407 and February maturity. Use the put-call parity formula to compute the price of a zero-coupon bond expiring in February. Use the data in Table 2. Please show your calculations. Discuss your result. You also observe the following market for European Call and Put options on the S&P 500 ETF: Today: 10th January 2023 Spot index level: 407 see image attached
The one-year futures price on a particular stock-index portfolio is 2,620, the stock index currently is 2,600, the one-year risk-free interest rate is 2.0%, and the year-end dividend that will be paid on a $2,600 investment in the index portfolio is $25. Required: By how much is the contract mispriced? (Input the amount as positive value.) The futures price is its "proper" or parity value.
Vijay
A company has $20 million portfolio with market beta 1.2. Current index futures price is F0 = 1080 and each contract is for delivery of 250 times the index. To reduce the beta of portfolio to 0.6, the company should (a) short 44 index futures contracts (b) short 74 index futures contracts (c) short 88 index futures contracts (d) buy 44 index futures contracts (e) buy 89 index futures contracts
You BUY a futures contract with the characteristics below. Assuming the S&P500 contract suddenly RISES by 12.00 points, what is your profit or loss as a return on the initial margin? S&P500 e-mini contract Futures (FO) 2,646.000 Initial margin 5420 Maint margin 4610 O 9.68% O 11.07% 10.15% 11.49% O 10.61%
i need the answer quickly
9) This is an exercise about financial futures. Can you please check the picture and answer the question? Only one option is right (A, B, C, or D).

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