Answer the finance question.

1. Imagine that you are holding 5,300 shares of stock, currently selling at $40 per share. You are ready to sell the shares but would prefer to put off the sale until next year due to tax reasons. If you continue to hold the shares until January, however, you face the risk that the stock will drop in value before year-end. You decide to use a collar to limit downside risk without laying out a good deal of additional funds. January call options with a strike price of $45 are selling at $3, and January puts with a strike price of $35 are selling at $4. What will be the value of your portfolio in January (net of the proceeds from the options) if the stock price ends up at $28, $40, $48? What will the value of your portfolio be if you simply continued to hold the shares?

2. You purchase one Microsoft December $145 put contract for a premium of $8.10. What is your maximum possible profit? Assume each contract is for 100 shares.

3. An investor purchases a stock for $57 and a put for $0.85 with a strike price of $52. The investor sells a call for $0.85 with a strike price of $61.What are the maximum profit and loss for this position? (Loss amount should be indicated by a minus sign.)

4. OneChicago 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 4% per year

a. If Brandex stock now sells at $250 per share, what should the futures price be? (Round your answer to 2 decimal places.)

b. Brandex stock now sells at $250 per share. If the Brandex stock price drops by 2.5%, what will be the new futures price and the change in the investor’s margin account? (Input all amounts as positive values. Do not round intermediate calculations. Round your answers to 2 decimal places.)

c. Brandex stock now sells at $250 per share. If the margin on the contract is $50,000, what is the percentage return on the investor’s position, if the Brandex stock price drops by 2.5%? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

5. The margin requirement on the S&P 500 futures contract is 8%, and the stock index is currently 1,900. Each contract has a multiplier of $50.

a. How much margin must be put up for each contract sold?

b. If the futures price falls by 1% to 1,881, what will happen to the margin account of an investor who holds one contract? (Input the amount as a positive value.)

c-1. What will be the investor’s percentage return based on the amount put up as margin? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

c-2. What would be the current cash balance in the margin account?