Maxwell Securities buys a $100,000 par value, September 2010 Treasury bond contract at the quoted settle price in Table 15–8 on page 404.
a. What is the dollar value of the contract? Use the settle price in your calculation.
b. There is an initial margin requirement of $3,375 and a margin maintenance requirement of $2,500. If an interest-rate increase causes the bond to go down by 0.8 percent of par value, will Maxwell be called upon to put up more margin?
c. Assume Maxwell’s investment is for six months. To have a 100 percent annualized return on the initial $3,375 margin, by what percent of par value must the bond increase?