Suppose that on Monday, 7 July, you assume a long position in one December British pound futures contract at the futures price of $1.10/E. 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 Tuesday are shown in the following: Monday, 7 July: $1.15 Tuesday, 8 July: $1.05 What is the balance in your margin account at the end of Tuesday? Select one: a. $2,000 b. -$4,250 c. -$1,000 d. $750 $1.750

Suppose that on Monday, 7 July, you assume a long position in one December British pound futures contract at the futures price of $1.10/E. 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 Tuesday are shown in the following: Monday, 7 July: $1.15 Tuesday, 8 July: $1.05 What is the balance in your margin account at the end of Tuesday? Select one: a. $2,000 b. -$4,250 c. -$1,000 d. $750 $1.750

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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Concept explainers

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.

Question

Suppose that on Monday, 7 July, you assume a long position in one December British pound futures
contract at the futures price of $1.10/E. 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 Tuesday are
shown in the following:
Monday, 7 July: $1.15
Tuesday, 8 July: $1.05
What is the balance in your margin account at the end of Tuesday?
Select one:
a. $2,000
b. -$4,250
c. -$1,000
d. $750
e. $1,750
f. $1,500

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Step 2: Calculate the Daily Change in Futures Price and Impact on Margin Account

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Step 3: Determine the Final Balance

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