USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 132

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
December futures on the S&P 500 stock index trade at 250 times the index value of 1187.70. Your broker requires an initial margin of 10 percent on futures contracts. The current value of the S&P 500 stock index is 1178.
-Refer to Exhibit 15.14. Suppose at expiration the futures contract price is 250 times the index value of 1170. Disregarding transaction costs, what is your percentage return?

• A) 1.87%
• B) -0.68%
• C) -14.90%
• D) 10.36%
• E) 13.58%

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Definitions:

Federal Deficits

The shortfall where the government's expenditures exceed its revenues within a specific fiscal year.

Interest Payments

The regular payments made to lenders as compensation for the money borrowed, typically expressed as a percentage of the principal sum.

Debt Ceiling

A limit on the total amount of money the federal government can legally borrow.

Defense Spending

Government expenditure on military and defense-related activities, including salaries, equipment, operations, and research and development.