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Unformatted text preview: D. Bob pays the clearing house $174.2 and the clearing house pays Al $172 E. None, no payments are made until July The one day change is ($174.2 - $172.00)(100) = $220. Since Al buys the contract, he gains on increases in the contract prices (he can buy wheat at his contract price of $172 and sell it in the market at $174.2), whereas Bob, who sold the contract, loses on increases in the contract prices. Therefore, Bob will pay the clearing house and Al will be paid by the clearing house. 6. Assume that the current level of Standard & Poor's index is 250. The prospective dividend yield is 3.2%, and the interest rate is 7%. What is the value of a one-year future on the index? (Assume all dividend payments occur at the end of the year.) A. 230.7 B. 250.0 * C. 259.5 D. 267.5 E. None of the above Total return required = (250)(0.07) = 17.50 Return from dividend yield = (250)(0.032) = 8.0 Return from capital appreciation = 17.5 - 8.0 = 9.50...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08