Homework Answers
Question 15
When the futures trade below the spot, then the spot is expected to decrease. This is an example of backwardation.
Question 16
The expected level of S&P500 in 3-months does not depend on the market risk premium.
It depends on the e-mini futures price, dividend rate, and the risk free rate.
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Question 15 (1 point) If three month e-mini S&P500 futures trade below spot then the most...
Micro E-mini S&P 500 Futures contract
You have \(\$ 100,000\) to invest today. You are bullish about the stock market and you think that the S\&P 500 index is going up. You want to leverage your investment by taking a long position in S\&P 500 index futures.Micro E-mini S\&P 500 Futures contractThere is a new futures contract on the S\&P 500 index with a lower contract multiplier-only 5 times the index. You are using this contract to implement your strategy. You chose the contract expiring on...
Question 7 (1 point) You sell SPY and e-mini futures at a gain after holding them...
Question 7 (1 point) You sell SPY and e-mini futures at a gain after holding them for one month. How will be your gains taxed? ST and LT = short-term and long-term tax rates. O SPY with ST rate; for e-mini: 60% ST and 40% LT Both gains at ST rate E-mini with ST rate; for SPY: 60% ST and 40% LT O SPY with ST rate; for e-mini: 40% ST and 60% LT Question 8 (1 point) Spot is...
sume there are only three possible outcomes for the spot price of a commodity which underlies...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
On 1 January you sold one March maturity S&P/ASX 200 index futures contract at a futures...
On 1 January you sold one March maturity S&P/ASX 200 index futures contract at a futures price of 700. If the futures price is 800 on 1 February, what is your profit? The contract multiplier is $25. In other words, the contract calls for delivery of $25 times the value of index. 1 index point move translates into a $25 change in the value of the contract. a. $100 b. -$100 c. $700 d. $2,500 e. -$2,500 Which one of...
] Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce...
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Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
Question 2 (1 point) Each e-mini S&P future gives you $100k exposure and requires $10k initial...
Question 2 (1 point) Each e-mini S&P future gives you $100k exposure and requires $10k initial margin. You are long one future. What's your return on capital if S&P500 increases by 1%? rf=0 O O O O О>5%
Question 9 (4 points) Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222 is equivalent to -2.22%). A S_P500 -0.0222 0.0032 -0.0048 -0.0058 0.1333 0.04...
Question 9 (4 points) Below are returns on the stock A and S&P500 index. All numbers are in decimals (-0.0222 is equivalent to -2.22%). A S_P500 -0.0222 0.0032 -0.0048 -0.0058 0.1333 0.0434 0.0765 0.1081 -0.0161 -0.0121 0.1250 0.1400 0.0145 0.0368 -0.0475 -0.0454 0.0430 0.0577 -0.0260 -0.1374 0.0071 0.0064 0.0249 0.0186 0.0850 0.0215 -0.0624 -0.0752 0.0933 0.0365 0.0456 0.0528 -0.0632 -0.0131 0.0450 0.0009 0.0200 0.0017 0.0280 0.0985 Suppose that the next S&P500 return will be 7%. Use the CAPM model to...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New...
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
Cost-of-curent inons on she Perfect sume that markets are perfect in the s ofheine free from tract costs and res...
Cost-of-curent inons on she Perfect sume that markets are perfect in the s ofheine free from tract costs and restrictions on short selline Thest price of gold is 70 per ounce. Current interest rates are 100% compounded monthly. According to Lost-Ot-Carry Model, approximately what should the price of a gold tutus contract be if expiration is six months away Assume that the cost of storing the gold is so. (There 100 ounces of gold in a gold futures contract) a....
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly...
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies. Based on your understanding of P/E ratios, in which of the following situations would the average trailing P/E ratio...
Question 7 (1 point) You sell SPY and e-mini futures at a gain after holding them for one month. How will be your gains taxed? ST and LT = short-term and long-term tax rates. O SPY with ST rate; for e-mini: 60% ST and 40% LT Both gains at ST rate E-mini with ST rate; for SPY: 60% ST and 40% LT O SPY with ST rate; for e-mini: 40% ST and 60% LT Question 8 (1 point) Spot is...
sume there are only three possible outcomes for the spot price of a commodity which underlies a futures contract at the maturity of that futures contract. As seen today, these prices (i.e. those at the maturity of the futures contract) are 90, 100 or 110 and each may occur with probability 1/3, 1/3 and 1/3. Further, assume that futures market prices are set in accordance with the theory of (normal) contango. Which of the following is a potential price that...
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
Question 2 (1 point) Each e-mini S&P future gives you $100k exposure and requires $10k initial margin. You are long one future. What's your return on capital if S&P500 increases by 1%? rf=0 O O O O О>5%
1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is S3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will...
Cost-of-curent inons on she Perfect sume that markets are perfect in the s ofheine free from tract costs and restrictions on short selline Thest price of gold is 70 per ounce. Current interest rates are 100% compounded monthly. According to Lost-Ot-Carry Model, approximately what should the price of a gold tutus contract be if expiration is six months away Assume that the cost of storing the gold is so. (There 100 ounces of gold in a gold futures contract) a....
1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies. Based on your understanding of P/E ratios, in which of the following situations would the average trailing P/E ratio...
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