How margin accounts protect investors against credit risk

Assignment Help Finance Basics
Reference no: EM132952873

You want to invest $1 million in the S&P 500 index for one year. There are two ways to go about it. You could actually buy all the stocks in the index according to their index investment weights, or you could buy an S&P index futures contract (and put the $1 million in a risk-free investment for one year). The S&P index is now at 350, and an S&P index future with a one-year maturity is selling at 355. The riskless rate is 8%, and the dividend yield on the S&P index is 6%. Assume that the S&P contract size is equal to the index, and that all cash flows to the future occur at maturity (i.e., there is no daily resettlement).

QUESTION 1: PLEASE critically discuss how margin accounts protect investors against credit risk.

Reference no: EM132952873

Questions Cloud

Calculate the profitability index for investment : Hanmi Group, a consumer electronics conglomerate, is reviewing its annual budget in wireless technology. It is considering investments in three different techno
Draft a professional email to instructor : You are disputing the grade you received on the assessment and you have decided to email your professor. Draft a professional email to your instructor.
Calculate the required rate of return for best inc : Calculate the required rate of return for Best Inc., assuming that (1) investors expect a 3% rate of inflation in the future, (2) the real risk-free rate is 3.0
Make an incremental analysis for the special order : Make an incremental analysis for this special order. In July, normally a slack manufacturing month, ThreePoint Sports receives a special order for 10,000 basket
How margin accounts protect investors against credit risk : QUESTION 1: PLEASE critically discuss how margin accounts protect investors against credit risk.
Prepare the Statement of Changes in Capital : A receives a salary of P20,000 and a bonus of 3% of income after all bonuses. Prepare the Statement of Changes in Capital
Prepare the journal entries for flint co for the dates : Flint Co. purchased a put option on Echo, Prepare the journal entries for Flint Co. for the dates. January 7, 2020-Investment in put option on Echo shares
Explain why a company reported earnings : Explain why a company's reported earnings may not necessarily be an objective measure of economic reality. Give examples of when this might occur
Calculate the expected returns and standard deviations : Calculate the expected returns and standard deviations of a two-stock portfolio under each of the following conditions:

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd