The profit ascertained by the investor in the futures contract having maturity in the month of February Introduction: Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. If the effective personal tax rates on debt income and stock income are Td = 25% and TS = 20% respectively, what is the value of the firm according to the Miller model (Based on the same unlevered firm value in the earlier question)? a. $475,875 b. $536,921 c. $587,750 d. $623,050 e. $564,167

Refer to the data for Eccles Inc. earlier. If the effective personal tax rates on debt income and stock income are Td = 25% and TS = 20% respectively, what is the value of the firm according to the Miller model (Based on the same unlevered firm value in the earlier question)? a. $475,875 b. $536,921 c. $587,750 d. $623,050 O $564,167

Warren Supply Inc. wants to use debt and common equity for its capital budget of $800,000 in the coming year, but it will not issue any new common stock. It is forecasting an EPS of $3.00 on its 500,000 outstanding shares of stock and is committed to maintaining a $2.00 dividend per share. Given these constraints, what percentage of the capital budget must be financed with debt? a. 33.84% b. 37.50% c. 32.15% d. 30.54% e. 35.63%

Answer 2

Question

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Answer 6

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500

Conclusion

Hence, it can be concluded that the profit accounts for $2,500

Answer 7

Chapter 17, Problem 1PS

Summary Introduction

To calculate:

The profit ascertained by the investor in the futures contract having maturity in the month of February

Introduction:

Profit refers to the act of sale of a stock or security so as to ascertain gain after the stock price has moved up from the price at which it was actually acquired by the investor. Profit taking action can impact the broad market, specific sector and even an individual stock.

Answer 8

Expert Solution & Answer

Explanation of Solution

In this situation, a future contract with February maturity is being sold on January 01 at a future price amounting to $2,400. If the price of the future at the time of maturity stands to be $2,450. The contract multiplier stands to be $50. Therefore computation of the profit is shown below:

Profit=−Future price+Future contract price×Contract multiplier=−2450+2400×$50=−2500