In problem 1, if the S&P Index futures contract goes up to $1,283.60, what will be the total dollar profit on the contract? What is the percent return on the initial margin? If this price change occurred over four months, what is the annualized return? (Multiply by 12/4.)
Answer to relevant QuestionsReturn to problem 1 and assume that margin must be maintained at a minimum level of $22,500. If the S&P Index futures contract goes from its initial value down to $1,051.80, will there be a call for more margin? The New Horizon Pension Fund decides to hedge its $40 million stock portfolio on June 1. The portfolio has a beta of 1.10. It will use Nasdaq futures contracts selling at 1,571 to hedge. These contracts have a multiplier of ...The Infidelity Mutual Fund projects three possible outcomes for next year: weak performance (–5 percent), good performance (10 percent), and outstanding performance (30 percent). The good performance has a 50 percent ...If the two investments above were perfectly positively correlated (rij = +1), what would be the portfolio standard deviation? Comment on the statement, “It is possible that a bond with a shorter maturity than another bond may actually have a longer duration and be more price sensitive to interest rate changes.” Explain why a bond with a shorter ...
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