Question

One Chicago has just introduced a new single stock futures contract on the stock of Brandex, a company that currently pays no dividends. Each contract calls for delivery of 2,000 shares of stock in one year. The T-bill rate is 5% per year. a. If Brandex stock now sells at $260 per share, what should the futures price be

Answer 1

$273

Step-by-step explanation:

the futures price = current stock price x (1 + T-bill rate)ⁿ

• current stock price = $260
• T-bill rate = 5%
• n = is not given, but since the T-bill rate is for one year, I will suppose the futures contract is also for one year

the futures price = $260 x (1 + 5%)¹ = $260 x 1.05 = $273

A futures contract is a contract by which a buyer or seller is obligated to either purchase or sell (respectively) a stock or other security at a specific price in a specific date in the future.