It is June 15th, and you have just entered into a long position in a futures contract. The contract expire on October 15th and calls for the delivery of 300 tons of a commodity. Further, because this is a future position, it requires the posting of 20% of the current futures price as the initial margin. Th maintenance margin is 10% of the current futures price. Assume that the account is marked to marke on a monthly basis. The following represent the contract delivery prices (in dollars per ton) that preva on each settlement date: $120.00 June 15th (initiation) July 15th August 15th September 15th October 15th (delivery) 121.55 114.00 107.00 115.50
It is June 15th, and you have just entered into a long position in a futures contract. The contract expire on October 15th and calls for the delivery of 300 tons of a commodity. Further, because this is a future position, it requires the posting of 20% of the current futures price as the initial margin. Th maintenance margin is 10% of the current futures price. Assume that the account is marked to marke on a monthly basis. The following represent the contract delivery prices (in dollars per ton) that preva on each settlement date: $120.00 June 15th (initiation) July 15th August 15th September 15th October 15th (delivery) 121.55 114.00 107.00 115.50
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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Question
Assuming that the investment pays no dividend and requires a storage cost of 1 percent (of current
value), calculate the current (i.e., July 15th) implied spot price for a ton of the commodity and
September 15th implied price for the same ton. In your calculations, assume that an annual riskfree rate of 5 percent prevails over the entire contract life.
Transcribed Image Text:It is June 15th, and you have just entered into a long position in a futures contract. The contract expires
on October 15th and calls for the delivery of 300 tons of a commodity. Further, because this is a futures
position, it requires the posting of 20% of the current futures price as the initial margin. The
maintenance margin is 10% of the current futures price. Assume that the account is marked to market
on a monthly basis. The following represent the contract delivery prices (in dollars per ton) that prevail
on each settlement date:
June 15th (initiation)
July 15th
August 15th
September 15th
October 15th (delivery)
$120.00
121.55
114.00
107.00
115.50
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