Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year. Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

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Answer 1

Question

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

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OneChicago has just introduced a new single stock futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 1,000 shares of stock in one year. The T-bill rate is 3% per year. Required: a. If Brandex stock now sells at $150 per share, what should the futures price be? (Round your answer to 2 decimal places.) b. Brandex stock now sells at $150 per share. If the Brandex stock price drops by 2.0%, what will be the new futures price and the change in the investor's margin account? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.) c. Brandex stock now sells at $150 per share. If the margin on the contract is $20,000, what is the percentage return on the investor's position, if the Brandex stock price drops by 2.0%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

OneChicago 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?

The stock price of Amazon is $50. The price of a 4-month European call option and a European put option on the stock with a strike price of $50 is $3. The stock pays $0.5 in dividends in one month and $0.75 in three months. The risk-free interest rate is flat at 4% per annum. Determine which of the following statements is true. O 1. The put-call parity relationship holds so there are no arbitrage opportunities. O II. There are arbitrage opportunities given by sellig short the call option and borrowing $50 at the risk-free rate until maturity to buy the stock and the put option. O II. There are arbitrage opportunities given by sellig short the call option and borrowing $48.7591 at the risk-free rate until maturity to buy the stock and the put option. Note that 48.7591=50 - D, with D the present value of all dividend payments. O IV. There are arbitrage opportunities given by sellig short the stock and put option and buying the call option. The proceeds of this strategy, given by $50, are…

Answer 2

Question

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Expert Solution & Answer

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Answer 3

Question

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Expert Solution & Answer

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Answer 4

Question

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Expert Solution & Answer

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Answer 5

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Answer 6

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Answer 7

Chapter 22, Problem 13PS

A

Summary Introduction

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Answer 8

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

Answer 9

B

Summary Introduction

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

Answer 10

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Answer 11

C

Summary Introduction

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Answer 12

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Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 22 - Prob. 1PS Ch. 22 - Prob. 2PS Ch. 22 - Prob. 3PS Ch. 22 - Prob. 4PS Ch. 22 - Prob. 5PS Ch. 22 - Prob. 6PS Ch. 22 - Prob. 7PS Ch. 22 - Prob. 8PS Ch. 22 - Prob. 9PS Ch. 22 - Prob. 10PS

Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year. Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Solution Summary: The author explains the future price of Brandex stock if they sell at 120 per share and the T-bill rate is 6% per year.

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Want to see the full answer?

Chapter 22 Solutions

Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year. Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Solution Summary: The author explains the future price of Brandex stock if they sell at 120 per share and the T-bill rate is 6% per year.

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year. Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

To explain: Change in the future price and investor’s margin if future price drops by certain value. Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

To explain: Return percentage of investor’s position when the margin of the contract is $12000. Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

Want to see the full answer?

Chapter 22 Solutions

To explain: Future price of Brandex stock if they sell at $120 per share and the T-bill rate is 6% per year.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.

To explain: Change in the future price and investor’s margin if future price drops by certain value.

Introduction: Future contract is conformity between purchaser and retailer to purchase the commodities, bonds and stocks in prearranged date at a definite price.

To explain: Return percentage of investor’s position when the margin of the contract is $12000.

Introduction: Future contract is an agreement between buyer and seller to purchase the commodities, bonds and stocks in predetermined date at a defined price.