Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A trader buys two July futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is

A trader buys two July futures contracts on frozen orange juice. Each contract is for the delivery of 15,000 pounds. The current futures price is 160 cents per pound, the initial margin is $6,000 per contract, and the maintenance margin is $4,500 per contract. What price change would lead to a margin call?

a.

If orange juice increases by more than 20 cents this will lead to a margin call

b.

If orange juice increases by more than 10 cents this will lead to a margin call

c.

If orange juice falls by more than 20 cents this will lead to a margin call

d.

If orange juice falls by more than 10 cents this will lead to a margin call

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions