Consider a hypothetical futures contract in which the current price is $82. The initial margin requirement...

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Finance

Consider a hypothetical futures contract in which the currentprice is $82. The initial margin requirement is $5, and themaintenance margin requirement is $2. You go long 20 contracts andmeet all margin calls but do not withdraw any excess margin.
The settlement price and the spot price of the underlying fromday 0 to day 6 look like the following:
Day
Settlement Price
Spot Price of the Underlying
0
82
80
1
84
81
2
78
80
3
73
75
4
79
77
5
82
86
6
84
90
(1) Suppose you receive margin call in the beginningof each day, when your account is equal and less than maintenancemargin. The first day that you will receive margin call should beDay .
(2) The total amount that you are going to put in your account,from day 0 to day 6, will be
(3) The total loss and profit from Day 0 to Day 6, if the longholder always stays in the market, should be
(4) The ending balance in Day 3 should be

Answer & Explanation Solved by verified expert

3.9 Ratings (772 Votes)

1Initial margin 5 per contract For 20 contracts it is100the maintenance margin is 2 per contract For 20 contracts See Answer

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Transcribed Image Text

Consider a hypothetical futures contract in which the currentprice is $82. The initial margin requirement is $5, and themaintenance margin requirement is $2. You go long 20 contracts andmeet all margin calls but do not withdraw any excess margin.The settlement price and the spot price of the underlying fromday 0 to day 6 look like the following:DaySettlement PriceSpot Price of the Underlying08280184812788037375479775828668490(1) Suppose you receive margin call in the beginningof each day, when your account is equal and less than maintenancemargin. The first day that you will receive margin call should beDay .(2) The total amount that you are going to put in your account,from day 0 to day 6, will be(3) The total loss and profit from Day 0 to Day 6, if the longholder always stays in the market, should be (4) The ending balance in Day 3 should be

Day	Settlement Price	Spot Price of the Underlying
0	82	80
1	84	81
2	78	80
3	73	75
4	79	77
5	82	86
6	84	90