EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 22, Problem 4PS
(a)
Summary Introduction
To determine: Whether the statement that the future price on stock index with a high dividend yield should be higher than the future price on index with low dividend yield keeping other things same is true or not alongwith reasons.
Introduction : The future price of any stock index is decided by the spot − future parity equation. When yields are high, the price will be less and vice-versa.
(b)
Summary Introduction
To determine: Whether the statement that the future price on a high beta stock is higher than future price on a low stock beta keeping other things as same is true or not.
Introduction : The future price of any stock index is decided by the spot − future parity equation. When yields are high, the price will be less and vice-versa.
(c)
Summary Introduction
To determine: Whether the beta on a short position in S&P 500 futures contact is negative or not.
Introduction : The future price of any stock index is decided by the spot − future parity equation. When yields are high, the price will be less and vice-versa.
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What is the difference between the long and the short positions in a contract for the future delivery of the S&P 500 stock index? If you expect stock prices to fall, do you buy or sell stock index futures?View Solution:
What is the difference between the long and the short
At time t = 0, a trader takes a long position in a futures contract on stock i that willexpire at time T. the present value of this contract to the long is given by: See Image.Assume no-arbitrage pricing. Show analytically that if the return from stock i is positively correlated with the overall return on the stock market, then the futures market must be in backwardation at time t = 0.
If the S&P 500 Index futures contract is underpriced relative to the spot S&P 500 Index, you should __________
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