Exhibit 13-1 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 55

Multiple Choice

Exhibit 13-1
USE THE FOLLOWING INFORMATION FOR THE NEXT 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% on futures contracts. The current value of the S&P 500 stock index is 1178.
-Refer to Exhibit 13-1. Calculate the return on a cash investment in the S&P 500 stock index over the same time period

• A) 1.87%
• B) -0.68%
• C) -14.90%
• D) 10.36%
• E) None of the above

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Definitions:

One-Tailed Hypothesis

A directional hypothesis that specifies an expected direction of the effect or relationship between variables.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together, showing the strength and direction of their relationship.

Significant Correlation

A relationship between variables that is strong enough to not be attributed to chance, according to statistical tests.

Correlation Coefficient

A numerical index that reflects the degree of relationship between two variables ranging from -1 (perfect negative correlation) to +1 (perfect positive correlation).