Question 1. Margin Account and Settlement Suppose that you bought two one-year gold futures contracts when the one-year...

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Question 1. Margin Account andSettlement
Suppose that you bought two one-year gold futures contracts whenthe one-year futures price of gold was US$1,340.30 per troy ounce.You then closed the position at the end of the sixth trading day.The initial margin requirement is US$5,940 per contract, and themaintenance margin requirement is US$5,400 per contract. Onecontract is for 100 troy ounces of gold. The daily prices on theintervening trading days are shown in the following table.
Day
Settlement Price
0
1340.30
1
1345.50
2
1339.20
3
1330.60
4
1327.70
5
1337.70
6
1340.60
Assume that you deposit the initial margin and do not withdrawthe excess on any given day. Whenever a margin call occurs on Dayt, you would make a deposit to bring the balance up to meet theinitial margin requirement at the start of trading on Day t+1,i.e., the next day.
b.       Fillthe appropriate numbers in the blank cells in the followingtable.
Day
Settlement price per troy ounce
Mark-to-Market
Other Entries
Account Balance
Explanation
Margin Call? Y/N
0
$1340.30
1
$1345.50
2
$1339.20
3
$1330.60
4
$1327.70
5
$1337.70
6
$1340.60

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4.4 Ratings (935 Votes)

b. Fill the appropriate numbers in the blank cells in the following table.
Day	Settlement price per troy ounce	Mark-to-Market	Other Entries	Account Balance	Explanation	Margin Call? Y/N
0	$ 1,340.30	$ 2,68,060	$ 11,880	$ 11,880	Initial Margin Deposit	N
1	$ 1,345.50	$ 2,69,100		$ 12,920		N
2	$ 1,339.20	$ 2,67,840		$ 11,660		N
3	$ 1,330.60	$ 2,66,120		$ 9,940		Y
4	$ 1,327.70	$ 2,65,540	$ 860	$ 10,220	Initial Margin Deposit	Y
5	$ 1,337.70	$ 2,67,540	$ 580	$ 12,800	Initial Margin Deposit	N
6	$ 1,340.60	$ 2,68,120		$ 13,380		N
Amount withdrawn on closure of position = 13380.
Profit = 13380-(11880+860+580) =			$ 60
Alternatively: Profit = 268120-268060 =			$ 60
NOTE:
Maintenance margin requirement = $5400*2 =			$ 10,800

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Question 1. Margin Account andSettlement Suppose that you bought two one-year gold futures contracts whenthe one-year futures price of gold was US$1,340.30 per troy ounce.You then closed the position at the end of the sixth trading day.The initial margin requirement is US$5,940 per contract, and themaintenance margin requirement is US$5,400 per contract. Onecontract is for 100 troy ounces of gold. The daily prices on theintervening trading days are shown in the following table.DaySettlement Price01340.3011345.5021339.2031330.6041327.7051337.7061340.60Assume that you deposit the initial margin and do not withdrawthe excess on any given day. Whenever a margin call occurs on Dayt, you would make a deposit to bring the balance up to meet theinitial margin requirement at the start of trading on Day t+1,i.e., the next day. b. Fillthe appropriate numbers in the blank cells in the followingtable.DaySettlement price per troy ounceMark-to-MarketOther EntriesAccount BalanceExplanationMargin Call? Y/N0$1340.301$1345.502$1339.203$1330.604$1327.705$1337.706$1340.60

Day	Settlement Price
0	1340.30
1	1345.50
2	1339.20
3	1330.60
4	1327.70
5	1337.70
6	1340.60