Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(10 pts) An investor goes long a 6-month futures contract on 100 units of stock index XYZ. He makes an initial deposit of $25,000 in

image text in transcribed

(10 pts) An investor goes long a 6-month futures contract on 100 units of stock index XYZ. He makes an initial deposit of $25,000 in his margin account. The contract is marked-to-market and settled at the end of each week. The initial value of the XYZ index is 1000. The following table shows the index futures price for the first 4 weeks: Week Futures Price, End of Week 0 1000 1 1002 2 995 3 998 4 975 (A) Determine the amount in an investor's account at the end of 3 weeks. (B) At the end of week 4, the investor will get a margin call. How much does the investor need to put an additional money to his account in order to bring the amount into a required initial margin of $ 25,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ONE WORD FROM GOD CAN CHANGE YOUR FINANCES

Authors: Ken Copeland

1st Edition

1575629585, 978-1575629582

More Books

Students also viewed these Finance questions

Question

(3) Who is performing well and who is not performing well?

Answered: 1 week ago