FinTrade has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 800 shares of stock in one year. The T-bill rate is 8% per year. Required: If Brandex stock now sells at $180 per share, what should the futures price be? If the Brandex price drops by 6%, what will be the change in the futures price and the change in the investor’s margin account? If the margin on the contract is $13,900, what is the percentage return on the investor’s position?
FinTrade has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 800 shares of stock in one year. The T-bill rate is 8% per year. Required: If Brandex stock now sells at $180 per share, what should the futures price be? If the Brandex price drops by 6%, what will be the change in the futures price and the change in the investor’s margin account? If the margin on the contract is $13,900, what is the percentage return on the investor’s position?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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FinTrade has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 800 shares of stock in one year. The T-bill rate is 8% per year. Required: If Brandex stock now sells at $180 per share, what should the futures price be? If the Brandex price drops by 6%, what will be the change in the futures price and the change in the investor’s margin account? If the margin on the contract is $13,900, what is the percentage return on the investor’s position?
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