10 Questions
What is the gain on the futures position when the stock price rose to Rs.521.20?
Rs.95,850
What is the net cost of shares when the stock price declined to Rs.390 by 20th June?
Cost of buying shares in cash market plus the loss incurred on futures position
What happens when an investor takes a long position in a futures contract?
Locks in a price for a planned purchase at a future date
If an investor makes a loss on their futures position, what is the impact on the net cost of shares?
Increases the net cost of shares
How does a long position in a futures contract help an investor manage price risk?
By allowing to lock in a price for a planned purchase at a future date
What is the purpose of taking a long hedge using stock futures in this scenario?
To hedge against the risk of an increase in stock price
Why does the individual plan to use bank deposit funds to purchase shares on June 20, 2023?
Insufficient funds are available on May 10, 2023
What does it mean to 'square up your long position' in the futures contract?
Closing out the futures contract before its expiration
If the stock price declined to Rs.480 by June 20, 2023, what would be the individual's total outlay on purchasing the shares?
$7,25,000
What is the significance of choosing a futures contract expiring on June 29, 2023?
It aligns with the maturity date of the bank deposit
Calculate the risk exposure in a long hedge scenario using stock futures to hedge the price risk of a future stock purchase. Explore the impact of postponing the purchase and analyze the potential risks involved.
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