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

question 1

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. 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) None of the above

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Definitions:

Null Hypothesis

A statement that assumes no significant difference or effect exists in a set of observations, serving as the default assumption in hypothesis testing.

Chi-Square Test

A statistical method employed to ascertain whether a meaningful discrepancy exists between the anticipated frequencies and the actual frequencies across one or several categories.

Independence

In the context of probability and statistics, refers to events that have no influence on each other's likelihood of occurring.

Random Sample

A sample drawn from a population in such a way that every individual has an equal chance of being selected.