The process of marking to market a posts gains or

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55. The process of marking-to-market A. posts gains or losses to each account daily. B. may result in margin calls. C. impacts only long positions. D. all of the above are true. E. both A and B are true. Marking-to-market effectively puts futures contracts on a "pay as you go" basis. Difficulty: Easy 56. Futures contracts are regulated by The CFTC, a federal agency, sets rules and requirements for futures trading. Difficulty: Easy 22-30
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Chapter 22 - Futures Markets 57. Taxation of futures trading gains and losses Futures profits and losses are taxed based on cumulative year-end value due to marking-to- market procedures. Difficulty: Moderate 58. Speculators may use futures markets rather than spot markets because Futures markets allow speculators to benefit from leverage and minimize transactions costs. Both markets should be equally price-efficient. Difficulty: Moderate 59. Given a stock index with a value of $1,000, an anticipated dividend of $30 and a risk-free rate of 6%, what should be the value of one futures contract on the index? A. $943.40 B. $970.00 C. $913.40 D. $915.09 E. $1000.00 F = 1000/(1.06) - 30; F = 913.40. Difficulty: Difficult 22-31
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Chapter 22 - Futures Markets 60. Given a stock index with a value of $1,125, an anticipated dividend of $33 and a risk-free rate of 4%, what should be the value of one futures contract on the index? F = 1125/(1.04) - 33; F = 1048.73. Difficulty: Difficult 61. Given a stock index with a value of $1100, an anticipated dividend of $27 and a risk-free rate of 3%, that should be the value of one futures contract on the index? F = 1100/(1.03) - 27; F = 1040.96. Difficulty: Difficult 62. Given a stock index with a value of $1,200, an anticipated dividend of $45 and a risk-free rate of 6%, what should be the value of one futures contract on the index? F = 1200/(1.06) - 45; F = 1087.08. Difficulty: Difficult 22-32
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Chapter 22 - Futures Markets
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