8 - Chapter 13 Study Guide - Word Sign in G - 3 x File Home Insert Design Layout

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8 - Chapter 13 Study Guide - Word Sign in G - 3 x File Home Insert Design Layout References Mailings_Review View Help Tell me what you want to do e Share o + X Cut Times New Ro + |11 TA' A' Aa - E.EE, ET 1 1 P Find - ACf ACf AaBbc Aci AE AC bccl AC ac Replace Paste * Fomat Painter B I U - abe x, x* A- A - ==== =: 2-3- I Normal TNo Spac... Heading1 Heading2 Title Subtitle Subtle Em... Emphasis = Select- Clipboard Font Paragraph Styles GEditing 14. Stock index futures are priced than the stock index itself. D Ba Copy a. lower b. higher C. either higher or lover d. None of these choices are correct. 15. In August, Maurice Bolder forecasts that interest rates will increase over the next month. Thus, Bolder calls a broker and sells a Treasury bill futures contract for 102-00. Furthermore, the price of T-bills as of the September settlement date is 98-00. What is the nominal profit or loss (in dollars) from Bolder's speculative strategy? a S40,000; loss 6. $40,000; gain c. S20,000; loss d. $20,000; gain e. None of these choices are correct. 16. In August, Maurice Bolder forecasts that interest rates will increase over the next month. Thus, Bolder calls a broker and sells a Treasury bill futures contract for 102-00. Furthermore, the price of T-bills as of the September settlement date is 98-00. Assume instead that interest rates had decreased from August to September, and that the price of Page 2 of 5 1147 words (E H o Type here to search 0 0 A e 2 9 S BE A G -- - + 100% 85% • D G ) 1222017 V 4:20 PM I

Explanation / Answer

1

Option C

Stock Index Futures are higher than the price of stock index due to risk free rate but lower due to dividend yield..Both these things pull in opposite direction hence the net movement will determine whether stock index futures are priced higher or lower

2

Option B

Sold at 102 and bought at 98 hence profit of 4 So, total 4*10000

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