What is the value of the contract based on the index

Assignment Help Operation Management

Reference no: EM13970558

You expect the stock market to decline, but instead of selling stocks short, you decide to sell a stock index futures contract based on an index of New York Stock Exchange common stocks. The index is currently 600 and the contract has a value that is $250 times the amount of the index. The margin requirement is $2,000 and the maintenance margin requirement is $1,000. a. When you sell the contract, how much must you put up? b. What is the value of the contract based on the index? c. If after one week of trading the index stands at 601, what has happened to your position? How much have you lost or profited? d. If the index rose to 607, what would you be required to do? e. If the index declined to 594 (1 percent from the starting value), what is your percentage profit or loss on your position? f. If you had purchased the contract instead of selling it, how much would you have invested? g. If you had purchased the contract and the index subsequently rose from 600 to 607, what would be your required investment? h. Contrast your answers to parts (d) and (g). i. At the expiration of the contract, do you deliver the securities you contracted to sell?

Reference no: EM13970558

Questions Cloud

Limitations of developing a boston consulting group matrix : Explain the benefits and limitations of developing a Boston Consulting Group Matrix.

Functions are used in the context of internal analysis : Identify the five basic functions of management, and describe each function. Briefly describe how such functions are used in the context of internal analysis. Your response should be at least 200 words in length

Describe at least one strategic response : Identify five key economic variables that could represent major opportunities or threats to a bank in your town or city. Identify which that you believe to be most important, and describe at least one strategic response.

Value of multiculturalism and diversity in operating : While the primary focus should be on Walmart's global operations, integrate information on the regional and national levels. You also need to assess the value of multiculturalism and diversity in operating (managing) a company in a global environment..

What is the value of the contract based on the index : You expect the stock market to decline, but instead of selling stocks short, you decide to sell a stock index futures contract based on an index of New York Stock Exchange common stocks. What is the value of the contract based on the index?

How much must the speculator initially remit : The futures price of corn is $2.00. The contracts are for 10,000 bushels, so a contract is worth $20,000. The margin requirement is $2,000 a contract, and the maintenance margin requirement is $1,200. A speculator expects the price of the corn to fal..

Actively engaging in the protection of genuine assets : What distractions might prohibit organizations from actively engaging in the protection of genuine assets like people? Please provide and explain two specific examples.

What is the current maximum output of the process per day : I-mart is a discount optical shop that can fill most prescription orders in around 1 hour. The management is analyzing the processes at the store. There currently is one person assigned to each task below. What is the current maximum output of the pr..

An example of a factor condition : An example of a “factor condition” in Porter’s diamond is a(n)_____

User Account

All Pages