Question
A company that is expecting to receive EUR 500,000 in 60 days is considering entering into an FX futures contract to lock an exchange rate
A company that is expecting to receive EUR 500,000 in 60 days is considering entering into an FX futures contract to lock an exchange rate to USD for the transaction. The FX rate on the contract is EUR/USD 1.4125. Assume a contract size of EUR 125,000; initial margin of $5,400 per contract, and maintenance margin of $4,000 per contract. If the spot rate on the EUR changes from EUR/USD 1.4125 to EUR/USD 1.4235 what will be new value on the margin account?
CORRECT ANSWER IS $27,100, PLEASE EXPLAIN WHY STEP-BY-STEP
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Cost Accounting A Managerial Emphasis
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
15th edition
978-0133428704
