Baghiben The multiplier for a futures contract on a stock market index is $80. The maturity of the contract is one year, the current level of theindex is $5,100, and the risk-free interest rate is 0.4% per month. The dividend yield on the index is 0.1% per month. Suppose that afterone month, the stock index is at 5,150.Required:a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.b. Find the holding-period return if the initial margin on the contract is $10,600.Answer is complete but not entirely correct.Complete this question by entering your answers in the tabs below.Required ARequired BFind the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.Cash flow$4,000.00 x

The objective of the question is to calculate the cash flow from the mark-to-market proceeds on the…

Answered: The multiplier for a futures contract…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Binomial Model The current price of a stock is 20. In 1 year, the price will be either 26 or 16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of 21 and that expires in 1 year. (Hint: Use daily compounding.)
the multiplier of a futures contract on the stock market index is $250. The maturity of the contract is one year. The current level of the index is 2550 , and the risk free interest rate is .0% per month. The dividend yield on the index is .2% per month. Suppose that after five months, the stock index is at $2495. Assume that the party condition always hold exactly. Find the holding period return for the short position if the initial margin of the contract is 10% of the original contract value.
The multiplier for a futures contract on a stock market index is $50. The maturity of the contract is 1 year, the current level of the index is 1,800, and the risk-free interest rate is .5% per month. The dividend yield on the index is .2% per month. Suppose that after 1 month, the stock index is at 1,820.a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.b. Find the holding-period return if the initial margin on the contract is $5,000
The current value of BSE SENSEX is 10000 and the annualized dividend yield on the index is 5%. A six-month-futures contract on the BSE SENSEX is quoted at 10200. If the return on Treasury Bills available in the market for the same maturity is 5% and 25 % of the stocks included in the index will pay dividends during the next six months, you are required to a. Determine whether index futures is overpriced or under priced. b. Show risk-free arbitrage profits, if any, available to the investor irrespective of the value of the SENSEX on maturity with detail workings, assuming that the SENSEX on maturity can be i. 9900 orii. 10250 Solve fast please
Suppose the ASX200 Index is currently at 7,406, the expected dividend yield on the index is 2 percent per year, and the risk-free rate is 0.35%. Using the current price of ASX200 futures contracts that expire in six months recommend a program trading strategy for buying or selling the futures?
The spot price of gold today is $1, 507 per troy ounce, and the futures price for a contract maturing in seven months is $1, 548 per troy ounce. If Golddy Plc puts on a futures hedge today and lifts the hedge after five months. a) Calculate the cost of carry for gold. b) If the spot price of gold in five months' time turns out to be $1,520. What will be the futures price five months from now? c) How much is the basis in five months' time?
Consider the futures contract written on the S&P 500 index and maturing in one year. The interest rate is 3%, and the future value of dividends expected to be paid over the next year is $35. The current index level is 2,000. Assume that you can short sell the S&P index.a. Suppose the expected rate of return on the market is 8%. What is the expected level of the index in one year?b. What is the theoretical no-arbitrage price for a 1-year futures contract on the S&P 500 stock index?c. Suppose the actual futures price is 2,012. Is there an arbitrage opportunity here? If so, how would you exploit it?
You observe that the settlement price of a one-year futures contract for 1 share of a dividend paying stock is currently at $52. The current stock price is $50 and the risk-free interest rate is 10% p.a. (compounded annually). It is also known that the dividend yield on the stock is 4% p.a. (compounded annually). Set up a strategy to realize an arbitrage profit today and show the initial and terminal cash flows from each position taken in the strategy. Assume that investors can short-sell or buy the stock on margin and that they can borrow and lend at the risk-free rate. Thank you!
Consider these futures market data for the June delivery S&P 500 contract, exactly one year from today. The S&P 500 index is at 1,950, and the June maturity contract is at F0 = 1,951.a. If the current interest rate is 2.5%, and the average dividend rate of the stocks in the index is 1.9%, what fraction of the proceeds of stock short sales would need to be available to you to earn arbitrage profits?b. Suppose now that you in fact have access to 90% of the proceeds from a short sale. What is the lower bound on the futures price that rules out arbitrage opportunities?c. By how much does the actual futures price fall below the no-arbitrage bound?d. Formulate the appropriate arbitrage strategy, and calculate the profits to that strategy.
Suppose that the risk-free interest rate is 6% per annum with continuous compounding and that the dividend yield on a stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create?
ABC stock is currently trading at R70 per share. A dividend of R1 is expected after three monthsand another one of R1 after six months. A European call option on ABC stock has a strike priceof R65 and 8 months to maturity. Given that the risk-free rate is 10% and the volatility is 32%,compute the price of the option.
A stock has a spot price of $200. The stock pays a $5 dividend in 6 months. The continuous compounding risk-free rate for all maturities is 9%. What is the equilibrium price of a 2-year forward contract?

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