An investment banker believes that the dollar will appreciate relative to the euro over the next...

90.2K

Verified Solution

Question

Finance

An investment banker believes that the dollar will appreciaterelative to the euro over the next few days. The banker decides touse two euro futures contracts to trade based on her belief. Eachcontract has 150,000 euros attached. The initial and maintenancemargin is $15,000 and $10,000 per contract, respectively. Thefutures price on the day the banker opened her position (Tuesday)was $1.625.
The futures price on Wednesday is $1.605. Find the banker's endingmargin balance on Wednesday. (Assume any deficits are eliminated tokeep the account open and any excess funds remain in theaccount)
The futures price on Thursday is $1.665. Find the banker'sending margin balance (in USD) on Thursday. Assume any deficits areeliminated to keep the account open and any excess funds remain inthe account. Round intermediate steps to four decimals and yourfinal answer to two decimals. Do not use currency symbols or wordswhen entering your response.
The futures price on Friday is $1.615. Find the banker's endingmargin balance (in USD) on Friday. Assume any deficits areeliminated to keep the account open and any excess funds remain inthe account. Round intermediate steps to four decimals and yourfinal answer to two decimals. Do not use currency symbols or wordswhen entering your response.

Answer & Explanation Solved by verified expert

4.0 Ratings (531 Votes)

As the dollar appreciates against the euro the euro depreciates against the dollar This implies that the value of the euro is expected to go down with time Therefore the speculator investment banker in this case will go See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

An investment banker believes that the dollar will appreciaterelative to the euro over the next few days. The banker decides touse two euro futures contracts to trade based on her belief. Eachcontract has 150,000 euros attached. The initial and maintenancemargin is $15,000 and $10,000 per contract, respectively. Thefutures price on the day the banker opened her position (Tuesday)was $1.625.The futures price on Wednesday is $1.605. Find the banker's endingmargin balance on Wednesday. (Assume any deficits are eliminated tokeep the account open and any excess funds remain in theaccount)The futures price on Thursday is $1.665. Find the banker'sending margin balance (in USD) on Thursday. Assume any deficits areeliminated to keep the account open and any excess funds remain inthe account. Round intermediate steps to four decimals and yourfinal answer to two decimals. Do not use currency symbols or wordswhen entering your response.The futures price on Friday is $1.615. Find the banker's endingmargin balance (in USD) on Friday. Assume any deficits areeliminated to keep the account open and any excess funds remain inthe account. Round intermediate steps to four decimals and yourfinal answer to two decimals. Do not use currency symbols or wordswhen entering your response.