The TMX has just introduced a single-stock futures contract on Brandex stock, a company that currently pays
Question:
The TMX has just introduced a single-stock futures contract on Brandex stock, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in 1 year. The T-bill rate is 6% per year.
a. If Brandex stock now sells at $120 per share, what should the futures price be?
b. If the Brandex price drops by 3%, what will be the change in the futures price and the change in the investor's margin account?
c. If the margin on the contract is $12,000, what is the percentage return on the investor's position?
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a 120 x 106 12720 b The stock price fall...View the full answer
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