Question
A new client of the bank, Ashleighs Agriculture (AA), are worried about the price of soybeans increasing. AA plan to purchase 1,000,000 bushels of soybeans
A new client of the bank, Ashleighs Agriculture (AA), are worried about the price of soybeans increasing. AA plan to purchase 1,000,000 bushels of soybeans on September 29 2017. Currently on June 30 2017, soybeans are 10.31 USD per bushel and November soybean futures contracts trade at 9882 cents. In addition, you obtain the following information from the CME: Soybeans Futures Contract Specifications
Trading Unit: 5,000 bushels
ricing Unit: US cents per bushel
Initial Margin: $3,375
Maintenance Margin: $2,500
Contract Months: January, March, May, July, August, September and November
Settlement Procedure: Physical delivery
Price quote: 9702 = 970 + 2/8 US cents
a) AA are still unsure following your explanation of margin requirements. Complete the following table (between the dates indicated) to show AA the cash flows associated with their margin account for a single soybean futures contract. Assume futures prices are settled weekly (not daily).
Futures price (in cents) of the November 2017 contract 988.25 Weekly Gain (Loss) (USD per contract) Margin Account Balance (USD per contract) Margin Call (in USD) Date 3,375 Jun 30 2017 Jul 7 2017 Jul 14 2017 Jul 21 2017 Jul 28 2017 Aug 4 2017 Aug 11 2017 Aug 18 2017 Aug 25 2017 Sep 1 2017 Sep 8 2017 Sep 15 2017 Sep 22 2017 Sep 29 2017 986.23 985.11 983.84 970.57 954.32 979.54 981.32 985.67 989.90 990.32 1001.48 1011.92 1022.50Step by Step Solution
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