You expect the stock market to increase, but instead of acquiring stock, you decide to acquire a stock index futures contract. That index is currently 60.0, and the contract has a value that is $800 times the amount of the index. The margin requirement is $4,000.
$ ________
$ ________
If the value of the index rises 1 percent to 60.600, what is the profit on the investment? Round your answer to the nearest cent.
$ ________
What is the percentage earned on the funds you put up? Round your answer to one decimal place.
________%
_______ %
The percentage __profit / loss___ is ______%.
Ans. a) Given Index Value 60.00, Lot Size 800 and Margin required $4000
The value need to put up to acquire Index future is the amount of margin required.
The value need to put up to acquire Index future = $4000
Ans. b) The Value of the contract = Index value * Lot Size
The Value of the contract = 60*800
The Value of the contract = $48000
Ans. c): If Index rises 1% from 60.00 to 60.600
Profit = Increment in Index value * Lot size
Profit = (60.600-60) * 800
Profit = 0.600*800 = $480
The Fund Invested = Margin paid = $4000
Percentage Earned on the fund invested = (Profit/ Fund Invested)*100
Percentage Earned on the fund invested = 480/4000 = 12.00%
Ans.d) If Index declines 1% from 60.00 to 59.400
Loss = Decrease in Index value * Lot size
Loss = 0.600*800 = $480.00
Percentage lose on the fund invested = (Loss/Fund Invested)*100
Percentage lose on the fund invested = 480/4000 = 12%
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