Calculate the cash flow from the mark-to-market proceeds

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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 index is 1,200, and the risk-free interest rate is 0.5% per month. The dividend yield on the index is 0.2% per month. Suppose that after one month, the stock index is at 1,220.

Problem 1) Calculate the cash flow from the mark-to-market proceeds on the contract. Assume that the parity condition always hold exactly.

Problem 2) Calculate the holding period return if the initial margin on the contract is $15,000

Reference no: EM132718634

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