Question: required all part a,b,c,d Question B3 (a) (b) Suppose the value of the S&P 500 stock index is currently 1,400. If the 1-year T-Bill rate

required all part

a,b,c,d

Question B3 (a) (b) Suppose the value of the S&P 500 stock index is currently 1,400. If the 1-year T-Bill rate is 3% and the expected dividend yield on the S&P 500 is 2%, What should the 1-year maturity futures price be? (4 marks) OneChicago has just introduced a single-stock futures contract on Brandex stock, a company that currently pay no dividends. Each contract calls for delivery of 1,000 shares of stock in 1 year. The T-bill is 6% per year. If Brandex stock now sells at $120 per share, what should the futures price be? (4 marks) Based on information from Part (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? (4 marks) Based on information from Part (b), if the margin on the contract is $12,000, what is the percentage return on the investor's position? (3 marks) (c) (d)

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