The spot price of gold is $1,800 an ounce but the futures price is $1,850. Since the contracts are for 100 ounces of gold, a contract is worth 100 3 $1,850 5 $185,000.

The margin requirement is $10,000 a contract. You expect the price of gold to rise and enter into a contract to buy gold.

a) How much do you have to initially remit?

b) If the futures price rises by 1 percent to $1,868.50, how much is in your account and what is the percentage gain or loss on your position?

c) If the futures price declines by 1 percent to $1,831.50, how much is in your account?

What is the percentage gain or loss?

d) If the futures price rises to $1,900, what must you do? How would your answer be different if the price declined to $1,750?

e) How do you close your position?