Using Yahoo Finance, take a look at the five year chart for Wal-Mart. Using this chart and other information you can find on this company, write a two-page paper answering the following question:
- What do you think the futures price of 100 shares of Wal-Mart to be delivered to you in one year be right now?
- Do you expect the price of the shares in one year to be much higher? Or lower? Or only a little bit higher?
- How risky is the stock? Is its price prone to wild swings up and down? Or has the price been relatively stable the last few years?
- What alternative investments you have access to? What rate does your bank give you on a savings account or certificate of deposit? The greater return you can get on other investments, the less you should be willing to pay for an equity future.
Source: Yahoo! Finance
(see attachment for graph)
I think that a year from now, based on the above five year chart of Wal-Mart's common stock price, the futures price of 100 shares would be slightly higher than today's price level. I believe that this price will range from $48 to $58 per share or $480 to $580 for 100 shares. This expectation is based on the current trend in the stock market and in Wal-Mart itself.
The solution examines Wal-Mart stocks five-year charts.