1- 12. If taxable income is $300,000, then they would pay taxes as follows (note that the
5 percent surtax on taxable income between $100,000 and $335,000 is added to
the 34% marginal tax paid, resulting in the 39% bracket):
Tax Liability:
$50,000 X 0.15
Please answer all questions. Each part of question 1 is worth 2 points, question 2 is worth 2 points, and
question 3 is worth 4 points (for a total of 10 points).
1. Core concepts question
(a) What is the definition of an efficient market?
A market where
Futures Fair Valuation
Valuation of a 6 month futures contract on gold.
We will assume there are no other costs other then interest income or
charges
FV = S e rt
S = 1000
r = 10%
t = 6 mos = .5
FV = 1000 e (.1)(.5)
= 1000 e .05
= 1051.2711
The assumption
Single Stock Futures
You are a hedge fund manager. One of the stocks you trade is XYZ. On your computer screen
you see the following
XYZ
=65/sh
The 3 month future is trading at 65.35.
You think there is an opportunity to create an arbitrage position. You