Suppose that you entered into a cash-and-carry like arrangement where you agreed to sell 10 shares of Apple through a forward contract, where the forward price is the agreed upon price. To hedge the sale, you use the futures arrangement from the previous problem. What is your profit?
Info:
Futures Arrangment from previous problem: Settlement on this exchange occurs every six months. The futures price varies over that time: the prices are 170, 180 and 173, at months 6, 12 and 18, respectively (you should already know the price at 24 months).
Margin account requires 25%
One share costs 159 as of now
Divident rate is 2%
Risk free rate is 5%
You purchase a quantity of shares today that will grow to 10 shares in 2 years.
Agree to sell 10 shares of apple for $150/share in 2 years. You reciee $223.62 in the sale.
Price of one share in 2 years is $179.