1) A trader enters into a short position of 20 futures contracts at an initial futures price of $85.00. Initial margin, per contract, is $7.50. Maintenance margin, per contract, is $7.00. Each contract is for one unit of underlying asset. Over the next three days, the contract settles at $86.00, $84.25, and $85.50, respectively. Assuming the trader does not withdraw any funds from the margin account, but does post variation margin sufficient to meet any maintenance margin calls, the balance in the margin account will be:

		$140.00 at initiation and $150.00 at settlement on Day 3
		$150.00 at initiation and $150.00 at settlement on Day 3
		$150.00 at initiation and $140.00 at settlement on Day 3
		None of above

2)

Suppose the 90-day LIBOR=5%, and the notional amount is $1 million for both forward and future contracts. Would an investor pay in 90 days from now? [Hint: check and compare your lecture notes on Interest Forward and Interest Futures]

		higher amount in the forward market
		higher amount in the futures market
		Same amount in forward and future markets
		Not enough information

3)

Consider the following statements regarding futures contracts that may be settled by delivery: (1) "The long initiates the delivery process" (2) "For many such contracts, delivery can take place any business day during the delivery month"

		Both are correct
		Both are wrong
		(1) is correct and (2) is wrong
		(1) is wrong and (2) is correct