Question

Today's settlement price on a Chicago Mercantile Exchange (CME) € futures contract is $1.7537/€. Your initial...

Today's settlement price on a Chicago Mercantile Exchange (CME) € futures contract is $1.7537/€. Your initial performance bond is at $2,000. The maintenance performance bond is $1,600. The next three days' settlement prices are $1.7670/€, $1.7219/€, and $1.6985/€. (The contractual size of one CME € contract is €62,500). You take a long position in one futures contract (buy €), what is the total additional fund you need to deposit so that you keep your marginal account for the three days?

A. $2836.85

B. $0, because the balance never drops below the "margin call".

C. $1438.65

D. $1987.50

Homework Answers

Answer #2

Solution:

When we are long in one future contract at $1.7537/€ . The contract size is  €62,500,  initial margin is $2000 and maintenance margin is $1600.

Current value of the future contract =  €62,500 * $1.7537/€ = $109,606.25

Initial margin = $2000

Borrowed money = $109,606.25 - $2000 = 107606.25

Exchange rate Value Equity

Borrowed Amt

Margin Call
$1.7537/€ 109606.3 2000 107606.3
$1.7670/€ 110437.5 =110437.5 - 107606.3 = 2831.25 No Equity Value > 1600
$1.7219/€ 107618.8 = 107618.8 -107606.3 = 12.5 Yes : 2000-12.5 = 1987.5
$1.6985/€ 106156.3

Correct answer is D) Margin call of $1987.50

answered by: anonymous
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