Question

Question 1. Margin Account and Settlement                 

Suppose that you bought two one-year gold futures contracts when the one-year futures price of gold was US$1,340.30 per troy ounce. You then closed the position at the end of the sixth trading day. The initial margin requirement is US$5,940 per contract, and the maintenance margin requirement is US$5,400 per contract. One contract is for 100 troy ounces of gold. The daily prices on the intervening trading days are shown in the following table.

Day	Settlement Price
0	1340.30
1	1345.50
2	1339.20
3	1330.60
4	1327.70
5	1337.70
6	1340.60

Assume that you deposit the initial margin and do not withdraw the excess on any given day. Whenever a margin call occurs on Day t, you would make a deposit to bring the balance up to meet the initial margin requirement at the start of trading on Day t+1, i.e., the next day.   

b.       Fill the appropriate numbers in the blank cells in the following table.

Day	Settlement price per troy ounce	Mark-to-Market	Other Entries	Account Balance	Explanation	Margin Call? Y/N
0	$1340.30
1	$1345.50
2	$1339.20
3	$1330.60
4	$1327.70
5	$1337.70
6	$1340.60

Answer 1

b. Fill the appropriate numbers in the blank cells in the following table.
Day	Settlement price per troy ounce	Mark-to-Market	Other Entries	Account Balance	Explanation	Margin Call? Y/N
0	$                 1,340.30	$          2,68,060	$       11,880	$            11,880	Initial Margin Deposit	N
1	$                 1,345.50	$          2,69,100		$            12,920		N
2	$                 1,339.20	$          2,67,840		$            11,660		N
3	$                 1,330.60	$          2,66,120		$ 9,940		Y
4	$                 1,327.70	$          2,65,540	$            860	$            10,220	Initial Margin Deposit	Y
5	$                 1,337.70	$          2,67,540	$            580	$            12,800	Initial Margin Deposit	N
6	$                 1,340.60	$          2,68,120		$            13,380		N
Amount withdrawn on closure of position = 13380.
Profit = 13380-(11880+860+580) =			$                   60
Alternatively: Profit = 268120-268060 =			$                   60
NOTE:
Maintenance margin requirement = $5400*2 =			$ 10,800