Revised+Tutorial+14 - : DueDate:31August2009 1 .TheJSE/ a...

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Tutorial 14 Derivatives: Futures Pricing and Hedging Due Date: 31 August 2009 1. Today is 1 September 2008. The JSE/FTSI All Share Index is 27 000 points  (weighted average dividend yield = 3% p.a.). The short-term treasury bill  rate is currently 8%, and the initial margin for ALSI index futures is set at 12%  of  the transaction value. a) What is the annual cost of carry for the ALSI index futures contracts? Is the  ALSI index futures contango or backwardation? b) What is the cost of carry for the ALSI index futures contracts that expire on  31 Dec 2008? c) What is the fair/intrinsic value for one ALSI index futures contract that   expires on 31 Dec 2008? d) Assume ALSI index futures contracts are trading at their fair values. What  will be the profit/loss and margin account levels to long and short futures 
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Revised+Tutorial+14 - : DueDate:31August2009 1 .TheJSE/ a...

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