The multiplier for a futures contract on a stock market index is $50. The maturity of the contract is 1 year, the current level of the index is 1,800, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per month. Suppose that after 1 month, the stock index is at 1,820. a. Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly

Cash Flow mark to market proceeds = $754.45

Explanation:

given :

stock market index = $50

current stock index= 1800

risk free interest rate= 0.5%

dividend yield=0.2%

Contract=1 year=12 month

Solution

The Current Index value after 12 months ie for future price = Current Stock Index * (1 + Risk Free - Dividend Yield)^12

Current Index value after 12 months = 1800 * (1 + 0.50% - 0.20%)^12

Current Index value after 12 months = 1865.88

Also, Future Index value after 1 month = Future Stock Index * (1 + Risk Free - Dividend Yield)^12-1

Future Index value after 1 month= 1820 * (1 + 0.50% - 0.20%)^11

Future Index value after 1 month = 1880.97

Therefore, Cash Flow mark to market proceeds = (Future Index Future Value - Current Index Future value) * Multiplier  which when variables are imputed gives us

Cash Flow mark to market proceeds = (1880.97 - 1865.88) * 50

Cash Flow mark to market proceeds = $754.45

$754.5

Explanation:

Given that

S0 = 1800

Interest rate = 5% = 0.05

Dividend yield = 2% = 0.02

Recall that

The initial futures price is:

F0 = S0 (1 + rf - d)

Thus,

= 1800 x (1 + .005 - .002)12

= 1865.88

Again,

In one month, the futures price will be:

F0 = 1820x (1 + .005 - .002)11 = 1880.97

The increase in the futures price is 15.09, that is 1880.97 - 1865.88, so the cash flow will be:

15.0 x $ 50

= $754.5

contributions made after 1986. after-tax contributions to employer plans made after 1986 are recovered pro rata with taxable amounts. the remaining $80,000 is from pre-tax contributions, employer matching dollars, and earnings on those amounts.

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi