Homework Answers
Solution-
As the price of stock is S given the 25 futures contract and 80 shares per contract, the value of whole contract must be
= 25*80*S
= 2000*S
Initial Margin must be-
= 20% of 2000*S
= 400*S
After 1 month, Stock price is 158 and margin call is 22559.05
hence, present value of initial margin balance must be-
= 158*80*25*e^(-9%*1/12)*0.2+22559.05
= 85286.84
To find S, we must equate this value with 400*S
S = 213.217
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