Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5. The table below shows settlement prices for lumber futures. One contract represents 110 mbf. Prices are quoted in dollars and cents per mbf.

image

5. The table below shows settlement prices for lumber futures. One contract represents 110 mbf. Prices are quoted in dollars and cents per mbf. The initial performance bond for one contract is $7,260. The maintenance performance bond is $6,600. A trader enters the market at the end of the day on Monday, December 20 at a price of $1026.30/mbf in a short position for two (2) contracts. (a) Complete the accounting table Date Monday, Dec 20, 2021 Tuesday, Dec 21, 2021 Wednesday, Dec 22, 2021 Friday, Dec 23, 2021 Monday, Dec 27, 2021 Tuesday, Dec 28, 2021 Wednesday, Dec 29, 2021 Price $1,026.30 $985.20 $1,014.80 $1,044.80 $1,089.80 $1,134.80 $1,163.10 Gain/Loss Margin Call Balance (b) If a margin call or calls were issued, on what day or days were they issued? How much money was the trader required to provide to their broker (assume they deposit the minimum required amount)? (c) Asuming the trader got into the market on Monday, December 20 at a price of $1026.3/mbf. and stayed in the market until the end of the day on Wednesday, December 29, what was their gain or loss? Show or explain how you got your answer. (d) What would happen to the trader's profit if the trader's broker increased the initial performance bond from $7,260 to $7,500 but left the maintenance performance bond the same at $6,600? (e) What would happen to the number of margin calls the trader received if their broker increased the initial performance bond from $7,260 to $7,500 but left the maintenance performance bond the same at $6,600? Provide an answer in general (do not go back to this specific example). Check the appropriate answer. The number of margin calls would increase The number of margin calls would increase or stay the same The number of margin calls would decrease The number of margin calls would decrease or stay the same

Step by Step Solution

3.60 Rating (172 Votes )

There are 3 Steps involved in it

Step: 1

a Date Price GainLoss Margin Call Balance Monday Dec 20 2021 102630 1524150 1524150 Tuesday Dec 21 2021 98520 475200 000 1048950 Wednesday Dec 22 2021 ... 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

Microeconomics

Authors: Christopher T.S. Ragan, Richard G Lipsey

14th canadian Edition

321866347, 978-0321866349

More Books

Students also viewed these Accounting questions