This is a follow up question so I copied/pasted the same question below for your convenience: An investor enters into a long futures position to buy 5,000 bushels of wheat for 575 cents per bushel. The initial margin is $5,000 and the maintenance margin is $2,500. c. Starting from the original position, the investor would have to see a price movement of _____ cents (above/below) ______ 575 cents in order to withdraw $2,000 from the margin account. So Initial Margin = $5,000;Maintenance Margin = $2,500;Withdraw Amount = $2,000;Original Price per Bushel = 575 cents or $5.75;Number of Bushels = 5,0001. How did you come up with the calculation? You wrote that: (new_price * 5000)/(5.75 * 5000) = withdraw amount/mainenance margin 2. Could you please explain the right side (i.e., why the ratio is withdraw amount to mainenance margin)?
This is a follow up question so I copied/pasted the same question below for your convenience:
An investor enters into a long futures position to buy 5,000 bushels of wheat for 575 cents per bushel. The initial margin is $5,000 and the maintenance margin is $2,500.
c. Starting from the original position, the investor would have to see a price movement of _____ cents (above/below) ______ 575 cents in order to withdraw $2,000 from the margin account.
So
Initial Margin = $5,000;
Maintenance Margin = $2,500;
Withdraw Amount = $2,000;
Original Price per Bushel = 575 cents or $5.75;
Number of Bushels = 5,000
1. How did you come up with the calculation? You wrote that:
(new_price * 5000)/(5.75 * 5000) = withdraw amount/mainenance margin
2. Could you please explain the right side (i.e., why the ratio is withdraw amount to mainenance margin)?
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