Question: Please answer type the question by using computer, so i can see it clearly, thank you!!! A stock market index futures contract has a one-year

Please answer type the question by using computer, so i can see it clearly, thank you!!!

A stock market index futures contract has a one-year maturity. The futures contract multiplier is $50. The index is currently at 30,000. The risk-free rate is 0.5 percent every month, while the stock market index dividend yield is 0.3 percent per month. The minimum starting margin required is 10%.

1(a) What is the parity value of the futures price now?

1(b) Assume the futures contract is fairly priced. How much initial margin you need to deposit if you long 1 contract?

1(c) Calculate the two-month holding-period return for your long position in the futures contract if the stock market index increases to 31,000 two months later. Assume the futures contract keeps being priced fairly.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!