If You Sell in April a Stock Index Future Contract

question 68

Multiple Choice

If you sell in April a stock index future contract on the S&P 500 index at the price of 1000 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 900, you have a ________ of $________.

• A)loss; 25000
• B)loss; 100
• C)profit; 25000
• D)profit; 100

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Definitions:

Annual Interest

The interest amount that is earned or paid on a financial instrument in one calendar year.

Tax Rate

The percentage at which an individual or corporation is taxed on their income or property.

Bond Issue

A financing method for companies or governments to raise capital by issuing debt securities to investors, which are payable over a specified term.

Unlevered Firm

A company that operates without using borrowed money, relying solely on its own equity for financing.