In: Finance
Given the following information below.
Spot = R100
Risk-free = 10%
Maturity = 1 year
After 4 months the new spot price is R140. What will be the profit
or loss to the short position in month 4?
Futures price after 4 months
Future price = R100 * (1 + 10%)(4 / 12)
Future price = R103.23
Profit/Loss to short position in month 4 = Futures price in month 4 - Spot price in month 4
Profit/Loss to short position in month 4 = R103.23 - R140
Profit/Loss to short position in month 4 = - R36.77
Loss to short position in month 4 = R36.77