Solution-Calculate the rate of return when futures price

Calculate the rate of return when futures price

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Reference no: EM13862290

1. Suppose John short sells (=writes) Apple put option to Mary. Is this identical to John buying Apple call option from Mary? Please explain in detail why they are the same or different.

2. A company enters into 5 long January futures contracts of wheat. The contract size of the wheat futures is 1,000 bushels and the current futures price is $3.00 per bushel. The initial margin requirement is $0.60 per bushel and the maintenance margin is $0.40 per bushel.

a. How much wheat does the company agreeing to buy/short in January?

b. How much cash does the company have to deposit to its margin account initially?

c. If futures price becomes $3.30 per bushel (10% increase), calculate the cumulative gain.

d. Calculate the rate of return when futures price becomes $3.30. (Hint: use answers to b and c.)

Reference no: EM13862290

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Calculate the rate of return when futures price

Reference no: EM13862290

Reference no: EM13862290

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