3. You would like to enter a short position in the December 2020 E-mini S&P 500 Futures contract at the CME futures market. Find the initial margin and maintenance margin from the CME website and answer the following:

(a) How much cash is required to enter 10 short futures contracts?

(b) If the S&P 500 goes down to 3000, what is your profit?

(c ) After you purchase your position, assume the next 10 days closing prices for the S&P are 3650, 3600, 3550, 3500, 3450, 3400, 3350, 3300, 3250, 3200. For each day, calculate the cash flow required each day to settle up on the 10 contracts. (Note: if you drop below the maintenance margin, you will have to add cash to bring your balance back to the initial margin).

(d) show that your result in (c) is the same as you would get if you held an equivalent position in forward contracts and closed the position after 10 days at a price of 3200