Tori Reynolds has been an avid stock market investor for years. She manages her port-folio fairly aggressively and likes to short sell whenever the opportunity presents itself. Recently, she has become fascinated with stock-index futures, especially the idea of being able to play the market as a whole. Tori thinks the market is headed down, and she decides to short sell some S&P 500 stock-index futures. Assume she shorts 3 contracts at 1,387.95 and has to make a margin deposit of $19,688 for each contract. How much profit will she make, and what will her return on invested capital be if the market does indeed drop so that the CME contracts are trading at 1,352.00 by the time they expire?
Answer to relevant QuestionsWhat should an investor establish before developing and executing an investment program? Briefly describe each of the seven steps involved in investing. Briefly describe the key features and differences among the following deposit accounts. a. Passbook savings account b. NOW account c. Money market deposit account d. Asset management account Classify the role of (a) Government, (b) Business, (c) Individuals as net suppliers or net demanders of funds. Mike and Julie Bedard are a working couple. They will file a joint income tax return. This year, they have the following taxable income: 1. $125,000 from salary and wages (ordinary income) 2. $1,000 in interest income 3. ...A wealthy investor holds $500,000 worth of U.S. Treasury bonds. These bonds are currently being quoted at 105% of par. The investor is concerned, however, that rates are headed up over the next 6 months, and he would like to ...
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