This flashcard is just one of a free flashcard set. See all flashcards!
24
A company enters into a short futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What is the futures price per unit above which there will be a margin call?
A.78 cents
B.76 cents
C.74 cents
D.72 cents
A.78 cents
B.76 cents
C.74 cents
D.72 cents
Answer: D
There will be a margin call when more than $1000 has been lost from the margin account so that the balance in the account is below the maintenance margin level. Because the company is short, each one cent rise in the price leads to a loss or 0.01×50,000 or $500. A greater than 2 cent rise in the futures price will therefore lead to a margin call. The future price is currently 70 cents. When the price rises above 72 cents there will be a margin call.
There will be a margin call when more than $1000 has been lost from the margin account so that the balance in the account is below the maintenance margin level. Because the company is short, each one cent rise in the price leads to a loss or 0.01×50,000 or $500. A greater than 2 cent rise in the futures price will therefore lead to a margin call. The future price is currently 70 cents. When the price rises above 72 cents there will be a margin call.
zetisonu@gmail.com (20.12.2023)
This realm is as much yours as it is http://snowrider3dgame.com ours, and we encourage you to leave an indelible mark with your prowess and sportsmanship.
iamrishu (04.11.2023)
Our women are not too bad darlings to manage. http://www.kajalahuja.com/ They need something beyond money and that incorporates spoiling, venerating, and care.
victorpatrick (31.10.2023)
Believe me, you are amazing because you use http://bitlifegame.org/ only a few words to inspire others and that is an incredible talent.
adelebrown68 (30.08.2023)
If you're a gamer in search of a delightful and engaging experience, look no further than https://papas-games.io. Prepare to be enchanted by their charm, addicted to their gameplay, and ready to embark on an unforgettable gaming adventure!
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015