Find the cash flow from mark-to-market proceeds on contract

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Reference no: EM131180423

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 700, 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 708.

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 $15,000.

Reference no: EM131180423

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