Question 1) The annualized dividend yield on the s&p 500 is 1.40%. The continuously compounded interest rate is 6.4%. if the 9-month forward price is $925.28 and the index is priced at 950.46$, what is the profit/loss from a cash and carry strategy?
a. 61.50 gain
b. 25.18 loss
c. 25.18 gain
d. 61.50 loss
Question 2) The manager of a blue chip growth stock mutual fund is trying to fully hedge the $650 million portfolio position during the last two months of the calendar year. the current price of the S&P 500 Index futures contract is 1200. If the mutual fund has a beta of 1.24 how many contracts will be needed to hedge the fund?
a) 541,666
b) 2,686
c) 242,963
d) 1,083
Question 3) Consider an investment in five S&P 500 Index futures contracts at a price of $924.80. the initial margin requirement is 15% and the maintenance margin is 10.0%. If the continuously compounded interest rate is 5.0% what will the futures price need to be for a margin call to occur 10 days from now? Assume no settlement within the 10 days.
a.) $852.64
b.) $905.25
c.) $898.63
d.) $872.79
Question 4) The price of an S&P 500 Index futures contract is $988.26 when you decide to enter a long position. When the position is closed the futures price is $930.32. If there are no settlement requirements, what is your percentage gain or loss under a 15.0% margin requirement? (Ignore opportunity costs)