Suppose that the value of the S&P 500 stock index is 1,150. a. If each futures contract

Question:

Suppose that the value of the S&P 500 stock index is 1,150.

a. If each futures contract costs $25 to trade with a discount broker, how much is the transaction cost per dollar of stock controlled by the futures contract?

b. If the average price of a share on the NYSE is about $40, how much is the transaction cost per “typical share” controlled by one futures contract?

c. For small investors, a typical transaction cost per share in stocks directly is about 15 cents per share. How many times the transactions costs in futures markets is this?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...