honeycfa

If the margin balance in a futures account with a long position goes below the maintenance margin amount:

A) a margin deposit equal to the maintenance margin is required within two business days.

B) a deposit is required to return the account margin to the initial margin level.

C) a deposit is required which will bring the account to the maintenance margin level.

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Once account margin (based on the daily settlement price) falls below the maintenance margin level, it must be returned to the initial margin level, regardless of subsequent price changes.

honeycfa

The clearinghouse in a futures contract performs all but which of the following roles? The clearinghouse:

A) allows traders to reverse their position without having to contact the other side of the position.

B) guarantees the physical delivery of the underlying asset to the buyer of futures contracts.

C) guarantees traders against default from another party.

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The clearinghouse does not guarantee the physical delivery of the underlying asset. Indeed, most futures contracts do not have a physical delivery, but are reversed.

honeycfa

A similarity of margin accounts for both equities and futures is that for both:

A) interest is charged on the margin loan balance.

B) the value of the security is the collateral for the loan.

C) additional payment is required if margin falls below the maintenance margin.

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Both futures accounts and equity margin accounts have minimum margin requirements that, if violated, require the deposit of additional funds. There is no loan in a futures account; the margin deposit is a performance guarantee. The seller does not receive the margin deposit in futures trades. The seller must also deposit margin in order to open a position.

honeycfa

Initial margin deposits for futures accounts are:

A) based on price volatility.

B) set by the Federal Reserve for U.S. markets.

C) typically 50% of the purchase price.

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Margin deposits for futures trades are based on the price volatility of the underlying asset, are set by the clearinghouse, and are typically a small percentage of the contract value.