10

Suppose you enter into a short position in 6-month futures contract on 100 ounces of gold at a futures price of $1,100 per ounce. The initial required margin is $5,000.Two months after establishing the position, you notice that the futures price at the end of the trading day is now $1,122 per ounce.

a.When the futures price is $1,122 per ounce at the end of the trading day, what will be the new dollar balance in your account?

b.When the futures price is $1,122 per ounce at the end of the day, what will be the rate of return in the account considering the initial deposit of $5,000 that you made?(Note: You are asked for a rate of return, not a dollar amount.)