# Schewser - Exam 1 Volume 1 - Afternoon, Question 52

Hey guys, the specific question is as in the title.

Basically there are 2 situtations:

SITUATION 1: increase equity exposure by \$10M by purchasing 6 months futures NOT in a synthetic position

SITUATION 2: \$10M are not received for 6 months and contracts are purchased to create a \$10M in a synthetic position (in equity)

The question asks which situtation requires the largest number of contracts, and the answer they are equal, as \$10M in situation 2 is a future value. If it had been a present value, the number of contracts would have been higher.

Who can explain me this?

Remember the *(1+r)^t in the synthetic positions portion of the curriculum.

If you have \$10M on hand today, but need to invest in futures in 3 months time - you would increase the 10 M by the risk free rate (1+RFR)^(3/12) for 3 months - and then calculate the # of futures contracts based on that calculation.

Now since the \$10M is a future amount - you do not have to increase that …

I actually do not understand the not synthetic portion of the story.

For the synthetic it is ok, I invest risk free to get 10 million in 6 months, and the number of contracts is 10/q*f because 10 is already the future value. But what about the non synthetic: how does the number of contracts work to increase the equity position by 10 milion euros? Is it 10 because 10 million euros is our desired exposure?