What is the answer if you take a short position for the last question: Today's settlement...

What is the answer if you take a short position for the last question:

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".

Expert Solution

The answer is

A) $831.25

Initial margin is the amount of margin deposited at the time of taking position in futures.Maintenance margin is the balance below which if balance in the margin account goes below,you have to deposit additional funds and restore it to initial margin.

Here we took the future contract position @ $1.7537/€

The initial margin is triggered only when the future price will rise above $1.7537/€ to an extent that balance in margina account falls below $1600

In the question only on one day the future price is above $1.7537/€

There fore the margin call will be triggered on day one only if such loss exceeds $400 ($2000-$1600)

Loss on day 1 = (price on day 1-purchase price)*Size of contract*No. Of € in one contract

(1.767-1.7537)*62500= $831.25

If you have any doubt,please ask

Since loss is more than $400 ,margin call is triggered and we have to deposit $831.25 to restore the margin balance to initial margin level.

jeff jeffy answered 2 years ago

QUESTION 7 Multiple Answer If you are unable to reach a settlement with the IRS prior...

QUESTION 7 Multiple Answer If you are unable to reach a settlement with the IRS prior to trial, you'll want to be prepared for the trial. There are certain steps required and/or recommended. Select all of the items that apply: Be sure that your witnesses are available on the trial date. hold back on supplying documentation to the IRS attorney as it's better to bring this up at trial. Enter into a stipulation of facts which will be submitted to...

in a short answer describe the standard anatomical position

PLEASE ANSWER THE LAST QUESTIONS (as many as you can starting with the last question) On...

PLEASE ANSWER THE LAST QUESTIONS (as many as you can starting with the last question) On January 1, 2016, the following information was drawn from the accounting records of Carter Company: cash of $400; land of $2,400; notes payable of $700; and common stock of $1,540. Required a. Determine the amount of retained earnings as of January 1, 2016. g. During 2016, Carter Company earned cash revenue of $660, paid cash expenses of $380, and paid a cash dividend of...

A short answer question will require one paragraph or more to answer What are the four...

A short answer question will require one paragraph or more to answer What are the four emergent properties of water that play an important role in the lives of living organisms?

Watch 'The Big Short movie' and answer this question: What was in the backgroud of the...

Watch 'The Big Short movie' and answer this question: What was in the backgroud of the financial and economic crisis in 2007? Please indicate and describe in details 3 new major financial concept that you discovered via this movie. The ‘01_Homework’ has to be minimum 2000 characteres. There is no other formal

answer the question after reading the short article. Question: Do you think that are the bouquets...

answer the question after reading the short article. Question: Do you think that are the bouquets given away for free a public good? Free Flowers Are Being Given Away in Downtown Crossing The Society of American Florists wants to 'petal it forward' on Wednesday. by MADELINE BILIS· 10/18/2016, 10:18 a.m. Photo by the Massachusetts Office of Travel and Tourism on Flickr/Creative Commons Stroll down the pedestrian. walkway in Downtown Crossing on Wednesday and there’s good chance you’ll be surprised with...

Use the following to answer the next three questions. On 3/1/XX, you opened a short position...

Use the following to answer the next three questions. On 3/1/XX, you opened a short position in wheat futures contracts. Each contract has 5000 bushels of wheat attached, and each bushel traded at $4.30 at the time you opened your position. Your initial and maintenance margins per contract are $3325 and $2150, respectively. If you shorted 6 futures contracts, how much did you have to place in your margin account on 3/1? Round intermediate steps to four decimals and your...

Why are you interested in a project management Il position ? Please answer the question specifically...

Why are you interested in a project management Il position ? Please answer the question specifically . I don't need A page response.

short answer question: What is meritocracy? What part does it play in class systems?

SECTION B SHORT ANSWER QUESTIONS The short answer questions are worth 50% in this paper. QUESTION...

SECTION B SHORT ANSWER QUESTIONS The short answer questions are worth 50% in this paper. QUESTION ONE (a)The study of risk and return relationship continues to be an area of vital importance for financial planners. Explain risk and return relationship. What is the purpose of a product disclosure statement (PDS)? Is there an argument for scrapping PDSs on the basis that most investors are financially illiterate and don’t read or understand the documents? When making recommendations (assume that you are...

Question