On 31 December 2001,the All Ordinaries Index Closed at 3427

question 2

Multiple Choice

On 31 December 2001,the All Ordinaries Index closed at 3427 points and the September 2002 SPI 200 futures was priced at 3473 points.A speculator believes that share prices are likely to fall and so decides to sell September 2002 SPI 200 futures immediately.One week later,when the All Ordinaries Index rises to 3435 points and the September 2002 SPI 200 futures falls to 3471 points,the speculator decides to reverse her position.How much profit/loss does the speculator make?

• A)$200 loss.
• B)$1100 gain.
• C)$950 gain.
• D)$50 gain.

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Definitions:

Compensating Balance

A minimum bank account balance a borrower must maintain as part of a loan agreement.

Effective Annual Interest Rate

The real return on a savings account or any interest-bearing investment, taking into account the effect of compounding interest.

Interest Rate

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Short-term Investments

Assets intended to be converted into cash or sold within a year.