You are examining the S&P 500 on February 21. You can go long or short in a value-weighted portfolio of the stocks in the S&P 500, and you scale the value of this portfolio to equal the spot index value of $2,710. The April S&P 500 futures price on February 21 is $2,765, and the contract will be financially settled on April 21 based on the spot index value. The basket of stocks will pay dividends of $8 on March 21 and $12 on April 21. One-month LIBOR is 2.6% and two-month LIBOR is 2.8%. Is there an arbitrage opportunity? What are the cash flows generated by the arbitrage strategy?
You are examining the S&P 500 on February 21. You can go long or short in...
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...
On January 1, you sold one February maturity S&P 500 Index futures contract at a futures price of 2,418. If the futures price is 2,495 at contract maturity, what is your profit? The contract multiplier is $50. (Input the amount as positive value.)
(Cash Settlement.) Futures on the S&P 500 are cash settled by the CME using the opening price of each stock in the index on its primary exchange on the settlement date. These opening prices are then weighted according to each stock's weight in the index to arrive at the "special opening quote." Note that this quote does not correspond to the first (or last, or perhaps any) reported value of the index during that day. Agree or disagree with the...
On January 1, you sold one March maturity S&P 500 Index futures contract at a futures price of 1,000. If the futures price is 1,100 on February 1, what is your profit or loss? The contract multiplier is $250. (Input the amount as positive value.) (Click to select)LossProfit of $
p Chapter 10: Futures Contract and Swaps Exercise: 5, 6, 12, 15, and 20 5.Consider the futures contract written on the S&P 500 index and maturing in 6 months. The interest rate is 3% per 6-month period, and the future value of dividends expected to be paid over the next 6 months is $15. The current index level is 1,425. Assume that you can short sell the S&P index. a. Suppose the expected rate of return on the market is...
Suppose the value of the S&P 500 stock index is currently 1,000. 1-a. If the 1-year T-bill rate is 7% and the expected dividend yield on the S&P 500 is 6%, what should the 1-year maturity futures price be? Futures price $ 1-b. What if the T-bill rate is less than the dividend yield, for example, 1%? If the t-bill rate is less than the dividend yield, then the futures price should be: a.)less than the spot price b.) more...
You are managing a portfolio of common stocks with a current market value of $100 million. You have decided to hedge the price risk for approximately half of the portfolio using CME S&P 500 stock index futures contracts because you believe half of your portfolio's market value moves comparably with this index. Assume the CME S&P 500 stock index futures contract costs $250 per contract times the stated stock market index level. If you agree to sell futures contracts on...
A fund manager has a portfolio worth $75 million. The beta of the portfolio is 1.15. She plans to use 3-month futures contracts on S&P 500 to hedge the systematic risk over the next 2 months. The current 3-month futures price is 1315, and the multiplier of the futures contract is $250 times the index. How many futures contracts should the fund manager trade in?
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...
15.8. Bob takes a long position in one contract of S&P 500 futures. Each contract is for the delivery of 250 units of the index at a price of 1800 per unit. The initial margin is 10% of the notional value and the maintenance margin is 80% of the initial margin. Interest on the margin account is paid at an annual continuously compounded rate of 5%. The first mark-to-market occurs one week (7 days) after the sale of the contract....