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The futures price of a commodity such as wheat is $2.50 a bushel.
Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat.
d. If the futures price rises to $2.70, what must the speculator do?
e. If the futures price continues to decline to $2.32, how much does the speculator
have in the account?
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- Blossom Inc. entered into a futures contract to sell grain for $1,120 in 30 days. This contract helps the company manage its market risk by locking in the amount it will get when it sells the grain. The contracts trade on an exchange and are net settleable. The broker requires a $220 initial margin (normally a percentage of the market value of the contract or a fixed amount multiplied by the number of contracts). This amount is deposited in cash with the broker. Like the forward, the futures contract would have a zero value up front. This is a non-financial derivative because the underlying is a non-financial commodity (grain). Blossom intends to settle on a net basis. Prepare the related journal entry at the acquisition date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles Debit CreditSuppose that on Monday, 7 July, you assume a long position in one December British pound futures contract at the futures price of $1.10/£. The initial margin is $2,000, and the maintenance margin is $1,500. The contract size is £125,000. Assume you do not withdraw excess money from your margin balance. All margin requirements are met with cash. The settlement prices for Monday and the next two days are shown in the following: Monday: $1.10 Tuesday: $1.15 Wednesday: $1.07 What is the balance in your margin account at the end of Wednesday? The correct answer is B. 1500 - Could you please explain why 1500 is the correct answer. a. $1,750 b. $1,500 c. $2,000 d. $-$1,000 e. $750An investor enters into a long oil futures contract when the futures price is $18.0 per barrel. The contract size if 100 barrels of oil. How much does the investor gain or lose if the oil price at the end of the contract equals $16.75?
- Suppose that on September 05, 2021, a company takes a short position in one April 2022 live - cattle futures contract. One contract is for the delivery of 50,000 pounds of cattle. The initial margin for each contract is \(\$ 3, 000 \) and the maintenance margin is \(\$ 2,000 \). The futures price (per pound) is 180.00 cents when it enters into the contract.(a) If the company receives a margin call at the end of the third day to deposit a variation margin of $1250, what is the settlement price at the end of the day?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%Suppose that March oil futures have the price of $65/barrel, and the size of the contract is 1,000 barrels. When the contract matures in March, what will be the profit of a single long futures contract if the spot price is $68.50/barrel? Only typed Answer and give Answer fast
- The price of the July corn futures is $4.13, and the September corn futures are 10 cents higher. A trader thinks that the spread between July and September will contract.a. How would the trader use a spread order to bet on your view?b. Did the trader buy or sell the spread?c. How much money would you make if the price of July corn futures increases to $5.00 and the September contract drops to $4.50. Assume the spread trade was for 5000 bushels of corn.Fred enters into a futures contract to buy 10,000 pounds of cotton for $8 per pound. The initial margin is 5% of contract value, and the maintenance margin is 75% of the initial margin. What price (per pound) of cotton futures will trigger a margin call? ______. What amount would Fred’s broker have to post in response to this margin call? ______.June 2019 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be 0.05831 per MXN a. What speculative position would you enter into to attempt to profit from your beliefs? O Short position O Long Position b. Calculate your anticipated profits, assuming you take a position in three contracts. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Anticipated profit c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? (A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole number)
- Suppose a oil producer wants to hedge against possible price fluctuations in the market. For example, in November, he decides to enter into a short-sell position in a 2 (two) futures contracts in order to limit his exposure to a possible decline in the cash price prior to the time when he will sell his oil in the cash market. Assume that the spot price of oil is $30 and the futures price for a March futures contract is $45. What is the basis? Выберите один ответ: a. 30 b. 7.5 c. 25 d. 15 e. 45A trader enters into a short cotton forward contract when the forwards price is 50 cents per pound. The contract is for the delivery of 50000 pounds. How much does the trader gain or lose if the cotton price at the end of the contract is? 20 cents per pound 30 cents per pound In what price forward will be at the money, in the money, and out-the money?A cheese factory wants to protect their purchase price of milk so they hedge in milk futures at a price of $19.10. Expected basis is +$0.90. On the day they exit the futures market, the futures price is $18.90 and actual basis is +$0.50. Find the net price they will pay for milk.