Question :
The multiplier for a futures contract on the stock-market index is $250. The maturity of the contract is one year, the current level of the index is 600, and the risk-free interest rate is 0.3% per month.
The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 605.
a) Find the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always holds exactly.
b) Find the one-month holding-period return if the initial margin on the contract is $20,000.