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W3-FTMBA-FUTURES-SQA(7).pdf - 15th Aug 1st , 20th FTMBA :...

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15thAug1st, 20thFTMBA : Markets and InvestmentsSeminar: Questions(&Answers)Forward and Futures MarketsProfessor Keith CuthbertsonForward/Futures ContractsQuestion 1.What are the key differences between forward contracts and futures contracts?
Question 2.Explain how afutures contracton a stock can be used forspeculation(over the next month, say).Assume todays stock price is S0=100 (on the NYSE) and as a speculator you believe it will fall to S1=90 (overthe next month).Today’s futures price (in Chicago) is F0=101(and the contract matures in 1-year).a). Explain if today you will go long or short the futures contract. If the stock price does fall by $10 what is theoutcome of your speculation with the futures contract.b). What happens to your futures position when you close out, if you are wrong and the stock price increasesby $10ANSWER 2Speculation.
© K. Cuthbertson.

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Term
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futures contracts, Clearing House, Professor Keith Cuthbertson

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