If you determine that the dax 30 index futures is

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83. If you determine that the DAX-30 index futures is under priced relative to the spot DAX- 30 index you could make an arbitrage profit by A. buying all the stocks in the DAX-30 and selling put options on the DAX-30 index. B. selling short all the stocks in the DAX-30 and buying DAX-30 futures. C. selling all the stocks in the DAX-30 and buying call options on the DAX-30 index. D. buying DAX-30 index futures and selling all the stocks in the DAX-30. E. none of the above. If you think one asset is overpriced relative to another, you sell the overpriced asset and buy the other one. Difficulty: Moderate 84. On January 1, the listed spot and futures prices of a Treasury bond were 95.4 and 95.6. You sold $100,000 par value Treasury bonds and purchased one Treasury bond futures contract. One month later, the listed spot price and futures prices were 95 and 94.4, respectively. If you were to liquidate your position, your profits would be On bonds: $95,125 - $95,000 = $125; On futures: $94,125.00 - $95,187.50 = -$1,062.50; Net profits: $125 - $1,062.50; = -$937.50. Difficulty: Difficult 22-44
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Chapter 22 - Futures Markets 85. You purchased one oil future contract at $70 per barrel. What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs. $73.12 - $70.00 = $3.12 X 1,000 = $3,120. Difficulty: Moderate 86. You sold one oil future contract at $70 per barrel. What would be your profit (loss) at maturity if the oil spot price at that time is $73.12 per barrel? Assume the contract size is 1,000 barrels and there are no transactions costs. $70.00 - $73.12 = -$3.12 X 1,000 = -$3,120. Difficulty: Moderate 22-45
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Chapter 22 - Futures Markets 87. If a trader holding a long position in oil futures fails to meet the obligations of a futures contract, the party that is hurt by the failure is A. the offsetting short trader. B. the oil producer. C. the clearinghouse. D. the broker. E. the commodities dealer. The clearinghouse acts as a middle party to every transaction, and bears any losses arising from failure to meet contractual obligations. Difficulty: Moderate 22-46
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Chapter 22 - Futures Markets 88. Given a stock index with a value of $1,500, an anticipated dividend of $62 and a risk-free rate of 5.75%, what should be the value of one futures contract on the index? F = 1500/(1.0575) - 62; F = 1,356.44. Difficulty: Difficult Short Answer Questions 89. Describe the differences between futures and forward contracts. Futures contracts are traded on the organized exchanges and are standardized as to the contract size, the acceptable grade of the commodity, and the contract delivery date. A forward contract is only a commitment to contract in the future. No money exchanges hands initially. The contract is for a deferred delivery of an asset at an agreed upon price.
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