LOS c, (Part 2): Compute and interpret the margin balance, given the previous day's balance and the change in the futures price.
Q1. An investor bought a futures contract covering 100,000 Mexican Pesos at 0.08196 and deposited margin of $320. The following day the contract settlement price was 0.08201. The new margin balance in the account is:
A) $320.
B) $325.
C) $314.
Q2. An investor sold ten March stock index futures contracts. The multiplier on the contract is 250. At yesterday’s settlement price of 998.40 the margin balance in the account was computed as $86,450. Today the index future had a settlement price of 1000.20. The new margin amount is:
A) $90,950.
B) $81,950.
C) $86,900.
Q3. A trader is long four July gold futures contracts, each with a contract size of 300 oz. If the price of July gold increases from $380.20 to $381.00 per ounce the change in the margin balance will be:
A) $240.
B) $960.
C) -$960.
Q4. Faye Sagler takes a long position in 12 August yttrium futures contracts at a contract price of $3.50 per unit. Each contract is for 1,000 units of yttrium. The required initial margin is $400 per contract and the maintenance margin is $300 per contract. August yttrium futures decline to $3.42, $3.38, and $3.31 on the next three trading days. On the first day that Sagler will be required to deposit additional cash into her futures account, the required deposit is closest to:
A) $240.
B) $1,440.
C) $960.
Q5. A trader has a long position in a wheat contract.
- The initial margin is $5,000.
- The maintenance margin is $3,750.
- There are 5,000 bushels in each wheat contract.
- On July 10, the price is $2.00 per bushel.
What is the price at which the trader will receive a maintenance margin call?
A) $2.25.
B) $1.75.
C) $1.90.
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