Question

A company enters into a short futures contract to sell 25,000 units of a commodity for...

A company enters into a short futures contract to sell 25,000 units of a commodity for 950 cents per unit. The initial margin is $4,500 and the maintenance margin is $3,750.

Part a. Calculate the futures price per unit above which there will be a margin call.

Part b. Calculate the amount that has to be deposited in response to the margin call to maintain the account.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A company enters into 4 long futures contract each with a size of 20,000 units of...
A company enters into 4 long futures contract each with a size of 20,000 units of a commodity for 150 cents per unit. The initial margin is $10,000 and the maintenance margin is $8,000, both on a per contract basis. Consider the following statements. I. The futures price below which a margin call will occur is $1.4000. II. The futures price above which $10,000 can be withdrawn from the account is $1.6000. Which of the following is correct? a. Statement...
A company enters into a short future contract to sell 5,000 bushels of wheat for 450...
A company enters into a short future contract to sell 5,000 bushels of wheat for 450 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call? Under what circumstances could $1,500 be withdrawn from the margin account? Please show work.
Suppose that you enter into a short futures contract to sell July silver for $29.80 per...
Suppose that you enter into a short futures contract to sell July silver for $29.80 per ounce. The size of the contract is 5000 ounces. The initial margin is $ 3500, and the maintenance margin is $2500. What change in the futures price will lead to a margin call? A trader buys two July futures contracts on orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 170 cents per pound, the initial margin...
A company enters into a long futures contract to buy 5,000 bushels of wheat for 250...
A company enters into a long futures contract to buy 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call? Under what circumstances could $1,500 be withdrawn from the margin account?
A trader short sells four July futures contracts on frozen orange juice. Each contract is for...
A trader short sells four July futures contracts on frozen orange juice. Each contract is for the delivery of 10,000 pounds. The current futures price is 260 cents per pound, the initial margin is $5,000 per contract, and the maintenance margin is $4,000 per contract. (a) What price change would lead to a margin call? (b) Under what circumstances could $4,000 be withdrawn from the margin account? (b) Under what circumstances could $4,000 be withdrawn from the margin account?
You short 25 oil futures contracts at a price of $1.52 per gallon, where each contract...
You short 25 oil futures contracts at a price of $1.52 per gallon, where each contract represents 42,000 gallons. You initial margin is $6,075 per contract, and the maintenance margin is 4,500 per contract. If the settlement price today is $1.59, what is your gain or loss? Will you receive a margin call? If so, how much do you need to deposit into the account?
A speculator takes a short position in a futures contract on a commodity on November 1,...
A speculator takes a short position in a futures contract on a commodity on November 1, 2012 to hedge an exposure on March 1, 2013. The initial futures price is $61. On December 31, 2012 the futures price is $63. On March 1, 2013 it is $59. The contract is closed out on March 1, 2013. What gain/loss is recognized in the accounting year January 1 to December 31, 2013? Each contract is on 1000 units of the commodity.
Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance...
Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance margin of $4,500 per contract. Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel. You sold one wheat futures contract yesterday at the closing settlement price quote of 786. Today, the settlement quote is 808. Will you receive a margin call and if so, for what amount? All margin calls restore the margin level to its initial level. If...
Suppose that an investor enters into a futures contract to buy silver for $16.80 per ounce....
Suppose that an investor enters into a futures contract to buy silver for $16.80 per ounce. The size of the contract is 5,000 ounces. The initial margin is $3,000, and the maintenance margin is $1,000. Regarding a futures price that the investor will receive a margin call and the additional amount of money that the investor needs to deposit, which of the following statements is the most accurate? Select one: a. A futures price of $16.40; the additional amount of...
An investor takes a short position in three corn futures contracts (5,000 bushels each) at a...
An investor takes a short position in three corn futures contracts (5,000 bushels each) at a price of 350 cents per bushel. The initial margin is $1,750 per contract and the maintenance margin is $1,300 per contract. Track the margin account balance over the next five days given the following information. You should assume that the investor makes any necessary deposit in the event of a margin call. Settlement Price Daily Gain Account Balance Margin Call 1 348 2 353...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT