A Forwand contracts have no defalt riskB Futures contracts roquire an initial margin requirement be paid.c Forward contracts are markod to market daily-D. Forward contract buyers and sellers do not know who the counterparty iSE. Fuures contracts are caly traded over the counter18. You have agreed to deliver the underlying conmmodity on a futures contract in 90 days. Todaythe underlying commodity peice rises and you get a margin call. You must haveA. a long position in a fatures contractB. a short position in a futures contractC. sold a forward contractD. purchased a forward contractE purchased a call option on a futures contract19. You have taken a stock option position and, if the stock's price drops, you will get a levelgain no matter how far prices fall, but you could go bankrupt if the stock's price rises. You have

In short position, for future contract if the price of the contract raises, the seller become…

Answered: A Forwand contracts have no defalt risk…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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As a financial analyst at Deutsche Bank, NY, you are helping your client with futures hedging. Your client enters into a long position in futures contract to buy 5,000 bushels of wheat for $6.50 per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. Your client will be allowed to withdraw any balance in the margin account in excess of the initial margin and the company will get a margin call if the balance is going below the maintenance margin. a. Will the trader get a margin call if the futures price goes to $6.14? (sample answer: Yes or No) b. What will be the price that will trigger a margin call of $2,500? C. What will be the price that will allow you to withdraw just $2,500 from the margin account? (sample answer $4.50) (sample answer:$4.50)
Consider a 6-months futures contract on gold. We assume no income and that $1 per ounce per 6-months to store gold, with the payment being made at the end of the period. The spot price is $1620 and risk free rate is 2% for all maturities. How can an arbitrageur earn profit is the price of 6-month gold futures is 1630$?
(a) The transferring of risk onto the clearing house is not something unique to futures trading. In fact, most of financial intermediaries such as insurance companies, finance companies and bank take on risk transferred to them and manage these risks. Based on the above statement, discuss the TWO (2) types of margins in derivatives markets. (b) You as a farmer have gone short 15 March Cocoa futures contracts. The 5-day period using hypothetical futures settlement prices. On the day 0 which both parties enter the contract. Given the following information, determine the daily marking-to-market adjustment to both you and the counterparty account. (Assuming same total value) Contract size = 10 tons per contract Initial margin = 10 percent of total value Maintenance margin = 70 percent of initial margin
Assume a futures price of Php5000 at the start of the transaction, with Php250 initial margin requirement and a Ph150 maintenance margin requirement. The trader takes in a short position of 10 contracts. Marking-to-market process occurs over the period of seven trading days. A. Complete the table above for the holder of the long position. B. When could there be a margin call? C. How much are the total gains or losses by the end of day 7?
Bitcoin futures You have entered a short position in a Bitcoin futures contract. The contract size is 1 bitcoin. The initial margin required is $15,000. The maintenance margin is $12,500. The contract is entered at market close on March 9 at a price of $48,800. The futures price is 49,100 on March 10. It is 52,300 on March 11. It is 47,700 on March 12. What is the final margin account balance on March 12? Date Futures Price Daily Gain/Loss Margin Call Mar 9 Mar 10 Mar 11 Mar 12 48,800 49,100 52,300 47,700 Numeric Response Margin Acct Balance
Suppose that you enter into a short futures contract to sell July silver for $27.20 per ounce. The size of the contract is 5,000 ounces. The initial margin is $4,000, and the maintenance margin is $ 3,000. What change in the futures price will lead to a margin call? What happens if you do not meet the margin call? Question 33 options: The price of silver must drop to $27.00 per ounce for there to be a margin call. If the margin call is not met, your broker closes out your position. The price of silver must rise to $27.40 per ounce for there to be a margin call. If the margin call is not met, your broker closes out your position. The price of silver must rise to $27.40 per ounce for there to be a margin call. If the margin call is not met, the position remains open until the margin declines to $0.0. The price of silver must drop to $26.20 per ounce for there to be a margin call. If the margin call is not met, your broker closes out your position. Please answer fast I give you upvote.
1. Suppose trader A sells a E-miniS&P 500 indexDecember 2021 expiry (ESZ1)futures contract to trader Bon May 7 , 2021. Suppose the price declines and trader A liquidates their position by buying a futures contract fivedayslateron May12, 2021. Does trader A make a profit? Does trader B have to make a loss? Explain your answer. 2. Consider a large Australian cotton farmer who has just planted her crop. Once grown, she plans to export her production to China: Suppose the Australian cotton farmer goes short on a cotton no. 2 futures contract on the ICE exchange. Go to theice.com and look up the contract. What is the contract size? Is the contract settled with physical delivery or cashsettlement?
Give typing answer with explanation and conclusion An investor has a $1 million long position in T-bond futures. The investor’s broker requires a maintenance margin of 4.25%. Next day the value of the futures contracts drops by $30,000 to $970,000. By what amount he will receive a margin call? $28,725 $45,000 $30,000 $28,650 NOT ENOUGH DATA TO ANSWER $43,650
Refer to the Mini-S&P contract in Figure 22.1. Assume the closing price for this day.a. If the margin requirement is 23% of the futures price times the contract multiplier of $50, how much must you deposit with your broker to trade the March maturity contract? (Round your answer to the nearest whole dollar.)Required margin depositb. If the March futures price increases to 2594.70, what percentage return will you earn on your investment if you entered the long side of the contract at the price shown in the figure? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Percentage return on net investment%c. If the March futures price falls by 1%, what is your percentage return? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)Percentage return on net investment%
Assume today's settlement price on a CME EUR futures contract is $1.3170/EUR. You have a long position in one contract. Your performance bond account currently has a balance of $3,200. The next three days' settlement prices are $1.3156, $1.3163, and $1.3079. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Changes in the performance bond account I
A trader entered into a long S&P index futures contract when the futures price is 2,591 and closed it out when the futures price is 2,704. What is his gain or loss in dollars? The contract multiplier is $250. Write your answer in the format as 10000 or -10000, no dollar sign, no comma.

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