Apex Exchange has just introduced a futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 4% per year. Required: a. If Brandex stock now sells at $120 per share, what should the futures price be? Note: Round your answer to 2 decimal places. Futures price b. Brandex stock now sells at $120 per share. If the Brandex stock price drops by 3%, what will be the new futures price and the change in the investor's margin account? Note: Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. New futures price Investor's margin account

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
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24.

Apex Exchange has just introduced a futures contract on the stock of Brandex, a company that currently pays no dividends. Each
contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 4% per year.
Required:
a. If Brandex stock now sells at $120 per share, what should the futures price be?
Note: Round your answer to 2 decimal places.
Futures price
b. Brandex stock now sells at $120 per share. If the Brandex stock price drops by 3%, what will be the new futures price and the
change in the investor's margin account?
Note: Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.
New futures price
Investor's margin account
Transcribed Image Text:Apex Exchange has just introduced a futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 4% per year. Required: a. If Brandex stock now sells at $120 per share, what should the futures price be? Note: Round your answer to 2 decimal places. Futures price b. Brandex stock now sells at $120 per share. If the Brandex stock price drops by 3%, what will be the new futures price and the change in the investor's margin account? Note: Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places. New futures price Investor's margin account
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