What alternative investments you have access to

Reference no: EM131571412

Module- SLP: PRESENT VALUE

One specialized type of security is called an equity futures. This is a contract that guarantees you a share of a particular company to be delivered to you not today, but sometime in the future, at a price that is determined by the market right now. This price is usually called the futures price of the stock (note - the term is plural - "futures"). If you 'buy' this futures, you don't pay for the shares now. You are actually signing a contract whereby you are committed to pay that price in a particular date in the future, and you are guaranteed to receive one share of the company at that time, irrespective of its actual market price at that future date. Suppose for example that the futures price of the XYZ company is $40. Suppose you 'buy' a 6-months futures contract. If six months later the share price is $45, you gain $5 per share. If the market price in 6 months is only $35, then you lose $5.

Using the Yahoo Finance take a look at the five year chart for your reference company (the one you chose for SLP1). Using this chart and other information you can find on this company, write a paper answering the following question:

What do you think would the futures price of 100 shares of your reference company to be delivered to you in one year be right now?

SLP Assignment Expectations

The paper is to be two pages long. You DO NOT need to use complex mathematical formulas for this assignment. Instead, think about how much do you think the market value of 100 shares of your company will be in one year? In considering the possible answer please reflect also on the following:

Do you expect the price of the shares in one year to be much higher? Or lower? Or only a little bit higher?

How risky the stock is. Is its price prone to wild swings up and down? Or has the price been relatively stable the last few years?

What alternative investments you have access to. What rate does your bank give you on a savings account or certificate of deposit? The greater return you can get on other investments, the less you would be willing to pay for an equity future.

Reference no: EM131571412

Questions Cloud

Gender stratification of the workforce : What is your opninion of the both the wage gap between men and women as well as the gender stratification of the workforce?

Advertisement uses ethos to establish clinique''s credibility : The advertisement uses ethos to establish Clinique's credibility and authority to women when expressing the claim that women who use their products

Define net exports and net capital outflow : Consider how to define net exports and net capital outflow. Consider how to explain the relationship among saving, investment, and net capital outflow.

Price level affects the real value of money : Explain how an increase in the price level affects the real value of money?

What alternative investments you have access to : What alternative investments you have access to. What rate does your bank give you on a savings account or certificate of deposit?

Competitive industry faces a demand curve : QUESTION 1: Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by:

List the various costs : List the various costs to you associated with owning and operating this car. Make an estimate of the total annual cost of owning and operating the car

Effects of the development process on gender differences : What are effects of the development process on gender differences?

Technological changes and the introduction of computer : Technological changes and the introduction of computer based operations can increase demand for some types of labor and at the same time.

User Account

All Pages