The multiplier for a futures contract on a stock market index is $75. The maturity of the contract is 1 year, the current level of the index is 1,850, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.3% per month. Suppose that after 1 month, the stock index is at 1.870. a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the party condition always holds exactly (Do not round intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. Cash flow $15.00 b. Find the holding period return if the initial margin on the contract is $5,500. (Do not round intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. 0.02
The multiplier for a futures contract on a stock market index is $75. The maturity of the contract is 1 year, the current level of the index is 1,850, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.3% per month. Suppose that after 1 month, the stock index is at 1.870. a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the party condition always holds exactly (Do not round intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. Cash flow $15.00 b. Find the holding period return if the initial margin on the contract is $5,500. (Do not round intermediate calculations. Round your answer to 2 decimal places) Answer is complete but not entirely correct. 0.02
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 22-14
The multiplier for a futures contract on a stock market index is $75. The maturity of the contract is 1 year, the current level of the index
is 1,850, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.3% per month. Suppose that after 1
month, the stock index is at 1,870,
a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly (Do not
round intermediate calculations. Round your answer to 2 decimal places.)
Answer is complete but not entirely correct.
Cash flow
$15.00
b. Find the holding-period return if the initial margin on the contract is $5,500. (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
Answer is complete but not entirely correct.
Hoiding period lum
0.020
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