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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

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 short position in one futures contract (sell €), what is the total additional fund you need to deposit so that you keep your margin account over the three days?

A.

$831.25
B.

$1782.38
C.

$3206.44
D.

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

For the last question, what is your total percentage return at the end: 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 short position in one futures contract (sell €)

A. -31.21%

B. 36.09%

C. 121.85%

D. 24.37%

Solutions

Expert Solution

A)

B) IN A QUESTION 1 WE HAVE TAKEN LONG POSITION SO WE WILL BE BENEFITED WITH RISING PRICE BUT NOW WE HAVE SHORT POSITION IN PART2 SO WE WILL BE BENEFITED WITH THE FALL IN PRICE

C) IN THE SOLUTION TO QUESTION 2 IF YOU SEE ON DAY1 WE HAVE SUFFERED LOSS AND ON DAY2 AND DAY3 WE WERE IN PROFIT

RETRUN=FINAL PRICE-INITIAL PRICE/INITIAL INVESTMENT=TOTAL PROFIT/TOTAL INVESTMENT=3450/2831.25=1.21854=121.85%

TOTAL PROFIT= -831.25+2818.75+1462.5=3450

TOTAL INVESTMENT=INITIAL INVESTMENT+MARGIN MONEY ON DAY1=2000+831.25=2831.25

jeff jeffy answered 3 years ago
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