The multiplier for a futures contract on the stock-market index is $50. The maturity of the contract is one year, the current level of the index is 2,000, and the risk-free interest rate is 0.3% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 2,040. Required: 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.) Cash flow .I.. b. Find the one-month holding-period return if the initial margin on the contract is $10,000. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return %
The multiplier for a futures contract on the stock-market index is $50. The maturity of the contract is one year, the current level of the index is 2,000, and the risk-free interest rate is 0.3% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 2,040. Required: 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.) Cash flow .I.. b. Find the one-month holding-period return if the initial margin on the contract is $10,000. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Holding-period return %
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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Transcribed Image Text:The multiplier for a futures contract on the stock-market index is $50. The maturity of the
contract is one year, the current level of the index is 2,000, and the risk-free interest rate is
0.3% per month. The dividend yield on the index is 0.2% per month. Suppose that after one
month, the stock index is at 2,040.
Required:
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.)
Cash flow
.I..
b. Find the one-month holding-period return if the initial margin on the contract is $10,000.
(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Holding-period return
%
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