Question

Problem 22-13 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 900 shares of stock in 1 year. The T-bill rate is 9% per year. a. If Brandex stock now sells at $210 per share, what should the futures price be? (Round your answer to 2 decimal places.) Futures price $ 220.78 b. the Brandex price drops by what will be the new futures price and the change in the investor's margin account? Round "Futures price ( new"answer to 3 decimal places and other answer to the nearest dollar amount. Negative amount should be indicated by a minus sign) $ Futures price now) Change in the stor's mar 213.691 20 t s C. If the margin on the contracts SM000, what is the percentage return on the investor's position (Round your answer to places. Negative amount should be indicated by a minus sign) < Prev 4 of 5 ! Next > ge and

Answer 1

a)
Futures price = Spot price × (1 + Risk Free rate)
= $210 * (1 + 9%)
= $228.90

b)
Futures price = Spot price × (1 + Risk Free rate)

Spot price = $210 * (1 - 7%) = $195.30

Future price = $195.30 * (1 + 9%)
= $212.877

Change in futures price = $212.88 - $228.90 = -16.023

Change in margin account = -16.023 * 900 = -14,420.70 or -14,421

c)
Return (%) = -14,420.70 / 14,000
= -103.01