A stock index currently stands at 350. The risk-free interest rate is 6% per annum (with continuous compounding) and the dividend yield on the index is 1.2% per annum. What should the futures price for an eight-month contract be? O a. $ 364.28 O b. $338.98 O c. $ 355.65 d. $ 361.38
Q: On October 24, you plan to purchase a $1,200 computer by using one of your two credit cards. The…
A: When the lender lends a loan to the borrower, he charges a rate of interest on the borrowed amount.…
Q: Rent for U.S. commercial properties (office, industrial, and retail space) is typically quoted as:…
A: Commercial property leases in the United States are typically structured as "net leases," meaning…
Q: Ginormous Oil entered into an agreement to purchase all of the outstanding shares of Slick Company…
A: To determine the value that Ginormous Oil placed on control of Slick Co., we need to calculate the…
Q: A total of four students belong to all three teams, the baseball, basketball and football team.…
A: Let's assume that the number of players on the baseball team is B, the number of players on the…
Q: Baker Industries’ net income is $26000, its interest expense is $5000, and its tax rate is 45%. Its…
A: ROE (Return on Equity) and ROIC (Return on Invested Capital) are financial ratios used to evaluate…
Q: Storico Co. just paid a dividend of $2.00 per share. The company will increase its dividend by 20…
A: The Dividend Discount Model (DDM) is a valuation method used to estimate the intrinsic value of a…
Q: A 2.50% coupon municipal bond has 12 years left to maturity and has a price quote of 98.45. The bond…
A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…
Q: The High-Flying Growth Company (HFGC) has been growing very rapidly in recent years, making its…
A: Net Present Value: It represents the profitability generated by the project after taking into…
Q: Matheson Electronics has just developed a new electronic device that it believes will have broad…
A: Net Present Value: It represents the profit generated by the firm in absolute terms after…
Q: Problem 1: A man deposited ABCDE.00 in a bank of 10% per annum for (A+B+C) months and (D+E) days.…
A: Given: A=1 B=5 C=7 D=6 E=8 Solution : To calculate the ordinary simple interest on a deposit of…
Q: Allie gifted 100 shares of Fieri stock to Jim. Allie (the donor) had a basis in the stock of $55…
A: When someone receives a gift of stock, the tax consequences depend on the donor's basis in the stock…
Q: If gasoline prices have increased over the past 32 years from 25.9 cents per gallon to $3.459 per…
A: The inflation rate refers to the increase in the price of a commodity over time. It is used to…
Q: 1.Applying microeconomics principles, explain why was the real estate market ( properties and homes)…
A: The stock exchange prices of companies like Enron, Lehman, and Satyam computers crumbled in just a…
Q: QUIZ: Proportion What is the relationship between the ratios? (0.2)/(2.6) and (0.3)/(3.6) Drag and…
A: To compare the ratios (0.2)/(2.6) and (0.3)/(3.6), we can simplify each ratio by dividing the…
Q: 16. What annual rate r compounded continuously is equivalent to a nominal rate of 6% compounded…
A: We first need to determine the effective annual rate of semiannual compounding by using the formula…
Q: Given the NYSE advancing/declining (Num) and volume (Vol) Advancing Declining Day…
A: Note: Question number 2 is incomplete, the 3*3 table is missing and also the table or information…
Q: 1. If you invest $1,000 today in a security paying 8 percent compounded quarterly, how much will the…
A: A=P(1+i)n Where A =Amount P=Principal i=periodic interest rate n=number of compounding
Q: Three employees of the Horizon Distributing Company will receive annual pension payments from the…
A: The PV of a payment series is the cumulative value of the cash flows at present assuming they are…
Q: Seth had some marbles. He gave 2/3 of his marbles to Henry and bought 4 new marbles. After that, he…
A: This is a problem that uses mathematical expressions to solve it. It involves the initial quantity…
Q: As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have…
A: When companies earn profits from their financial operations, they distributed part of their profits…
Q: Use the ordinary annuity formula shown to the right to determine the accumulated amount in the…
A: An annuity is a payment series where the holder gets a fixed amount in return for a lump sum…
Q: H1. Optimal Capital Budgeting (Capital Expenditure valuations) Dandy Panda´s Japan affiliated…
A: To determine Dandy Panda's Japan optimal capital budget, we need to calculate the cost of each…
Q: Use the formula for the effective rate (annual effective yield) reff = (A/P)1/t − 1 where P is an…
A: Effective rate = (A / P)1/t - 1 P = initial investment = $50,000 t = Time = 6 years A = accumulated…
Q: You have just been offered a commercial paper with a face value of ¢45,000,000 which bears a…
A: Commercial paper is a type of short-term, unsecured debt instrument that is issued by corporations,…
Q: jerilu markets has a beta of 1.23 the risk free rate of return is 2.10 percent and the market rate…
A: Step 1 The investment return that an asset is anticipated to generate over and above the risk-free…
Q: Dimitri operates Downtown Discount Pharmacy, a sole proprietorship. Downtown Discount Pharmacy…
A: Net income = $205,000 Self-employment taxes = $21,263 Salary contribution = 15%
Q: You've collected the following information from your favorite financial website. 52-Week Price Lo…
A: Given the following: annual dividend = $2.14 52-week high price = $56.41 52-weel low price =…
Q: The next dividend payment by Im, Incorporated, will be $3.25 per share. The dividends are…
A: Required return on stock is calculated using following equation Required return = D1P0+g Where, D1…
Q: Today, a bond has a coupon rate of 13.6%, par value of $1000, YTM of 9.60%, and semi-annual coupons…
A:
Q: Find the compound interest earned if PhP 41,139 is deposited in a bank at 3.2% compounded monthly…
A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…
Q: Problem 3: Compute the equivalent rate of (A+B+C+D+E) % compounded semi-annually to a rate…
A: A=1 B=5 C=7 D=6 E=8 Therefore (A+B+C+D+E)%=(1+5+7+6+8)% = 27% compounded semi-annually.
Q: Required: 1. Estimate the amount of Stanley Mills's annual retirement payments for the 15 retirement…
A: NOTE; Question can answer up to 3 subparts only as per Honor code. Upload again for the remaining…
Q: You have borrowed a 30y mortgage with an initial amount of $500,000. Since the initial interest rate…
A: To calculate the effective annual rate, we need to take into account the impact of the discount…
Q: Laura is planning for her retirement 34 years from now. She plans to invest $4,100 per year for the…
A: We need to use future value of ordinary annuity formula to calculate value of annuity. FVA…
Q: You hold an annual coupon bond for 1 year, receiving the 0.14 coupon before selling. When bought it…
A: A bond is an instrument where the company raises debt capital from investors instead of traditional…
Q: What is the principal portion of the 200th payment of a fully amortizing $250,000, 30-year fixed…
A: We can use the excell funtions that are explained below and get the answers for the above question…
Q: 3. Rita has $15000 with her and plans to only invest a certain amount of this $15000 that would give…
A: Present value is the estimation of the current value of future cash value which is likely to be…
Q: Your annual salary 12 years ago was $14,500; it is now $25,000. What is the average annual rate of…
A: Time = t = 12 years Beginning value = bv = $14,500 Ending value = ev = $25,000
Q: A 3-month zero-coupon bond is selling for $99.5 and a 10-year zero-coupon bond is selling for $64.3.…
A: Data given: Selling price for 3-month Zero coupon bond=$99.5 Selling price for 10-year Zero coupon…
Q: Selena would like to start a new venture after she finishes school. She projects that her fixed…
A: Information Provided: Fixed costs = $50,200 Selling price per product = $22 Variable cost per unit…
Q: Problem No. 2 Receivables Investment McEwan Industries sells on terms of 3/10, net 25. Total sales…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Jacob purchased a bond for $880 with a 9% coupon. He sold the bond after one year when it was…
A: Coupon payment = Coupon rate×Par value = 0.09×$1000 = $90 Price of the bond at the time of sell of…
Q: A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 5 years, and…
A: Bonds are debt securities issued by the Government or other companies, who seek to raise money from…
Q: Sheridan Service has a line of credit loan with the bank. The initial loan balance was $8000.00.…
A: We have a loan account where payment and borrowing keeps happening. We need to find the balance when…
Q: The Dahlia Flower Company has earnings of $1.44 per share. If the benchmark PE for the company is…
A: Explanation : Earning Per share : Earning per share is also known as EPS. It shown the income…
Q: ABC., Inc., is currently operating at only 75 percent of fixed asset capacity. Current sales are…
A: Revenue: It refers to the money received by the business from the sale of its products or services.…
Q: Assuming the following: 1.4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of…
A: To calculate the market value of equity, we can use the formula: Market Value of Equity = (Net…
Q: Note: Round your interest amount answers to 2 decimal places. Enter the current yield answers as a…
A: The current yield is different from the bond's coupon rate, which is the fixed rate of interest that…
Q: Which of the following is not recognized as a measurement of risk? O median Orange best case/worst…
A: Median and Range are not typically recognized as direct measurements of risk, while the other…
Q: The total number of compounding periods will be 1 less than the number of years annuity payments…
A: Information Provided: No. of year = 2 Number of compounding periods per year = 12
Step by step
Solved in 2 steps with 2 images
- 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 $5,000A stock index currently stands at 100. The risk-free interest rate is 4% per annum (with continuous compounding) and the dividend yield on the index is 2% per annum. What should the futures price for a four-month contract be?In two-months the price of stock will be either $23 or $27. The risk-free interest rate is 10%. The current price of the stock is $25. Suppose the price of the stock will be ST at the end of the two-months and the derivative on the stock will pays off Sr?. Find the value of the derivative. (A) $621.39 (B) $729.39 (C) $529.39 (D) $639.26
- The multiplier for a futures contract on a certain stock market index is $250. The maturity of the contract is one year, the current level of the index is 1,500, and the risk-free interest rate is 0.2% per month. The dividend yield on the index is 0.1% per month. Suppose that after one month, the stock index is at 1,533. Find the cash flow from the mark-to-market proceeds on the contract. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Cash flowSuppose the 1-year futures price on a stock-index portfolio is 1,914, the stock index currently is 1,900, the 1-year risk-free interest rate is 3%, and the year-end dividend that will be paid on a $1,900 investment in the market index portfolio is $40.a. By how much is the contract mispriced?b. Formulate a zero-net-investment arbitrage portfolio and show that you can lock in riskless profits equal to the futures mispricing.c. Now assume (as is true for small investors) that if you short sell the stocks in the market index, the proceeds of the short sale are kept with the broker, and you do not receive any interest income on the funds. Is there still an arbitrage opportunity (assuming that you don’t already own the shares in the index)? Explain.d. Given the short-sale rules, what is the no-arbitrage band for the stock-futures price relation-ship? That is, given a stock index of 1,900, how high and how low can the futures price be without giving rise to arbitrage opportunities?Consider a 4-month forward contract for which the underlying asset is a stock index with value of 3, 825.97 and a continuous dividend yield of 0.5% Assume the continuous risk-free annual interest rate is 4.5%, a. Determine the no arbitrage forward price. $ Round your answer to the nearest cent b. Calculate the value of a long position if 2 month(s) later the index changes to 3, 825.97 and the risk-free rate is still 4.5% $ Round your answer to the nearest cent
- 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 2600 , and the risk free interest rate is .2% per month. The dividend yield on the index is ..4% per month. Suppose that after five months, the stock index is at $2533. 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 one-year futures price on a particular stock - index portfolio is 1,124.91, the stock index currently is 1, 116, the one-year risk-free interest rate is 2.61%, and the year-end dividend that will be paid on a $1,116 investment in the index portfolio is $13.73. By how much is the contract mispriced? future price - parity priceThe prices of European call and put options on a non-dividend-paying stock with 12 months to maturity, a strike price of $120, and an expiration date in 12 months are $20 and $5, respectively. The current stock price is $130. What is the implied risk-free rate? 8.62 % 9.05 % 5.85 % 4.26 %
- Given the following quotes: FBM KLCI spot = 747 points, risk-free rate = 4.5% annualised, FBM KLCI dividend yield = 1.75% annualised. i) If the 90-day KLCI futures is quoted at 762 points, show that arbitrage is possible ii) Calculate the arbitrage profit if FBM KLCI is 10% higher by futures maturity.a. A futures contract on a non-dividend-paying stock index with current value $130 has a maturity of one year. If the T-bill rate is 6%, what should the futures price be? b. What should the futures price be if the maturity of the contract is 2 years? c. What if the interest rate is 9% and the maturity of the contract is 2 years? Complete this question by entering your answers in the tabs below. Required A Required B Required C A futures contract on a non-dividend-paying stock index with current value $130 has a maturity of one year. If the T-bill rate is 6%, what should the futures price be? Note: Round your answer to 2 decimal places. Futures priceSuppose that the risk-free interest rate is 6% per annum with continuous compounding and the dividend yield on a stock index is 4% per annum. The index is standing at 400 and the futures price for a contract (on that index) deliverable in 9 months is 405. What arbitrage opportunity does this create? • Borrow to buy shares underlying the index and enter a short position in index futures contracts • Enter a long position in index futures contracts, short sell shares underlying the index and invest excess funds • Borrow to buy shares underlying the index and enter a long position in index futures contracts • Enter a short position in index futures contracts, short sell shares underlying the index and invest excess funds • No arbitrage opportunity