Question
A U.S. company sells a British pound (GBP) futures contract to cover possible exchange losses on its export orders denominated in GBP. The size of
A U.S. company sells a British pound (GBP) futures contract to cover possible exchange losses on its export orders denominated in GBP. The size of the contract is GBP 62,500 and the company will receive USD 1.70 for each GBP. The seller sets up an initial margin account of USD 1485; the maintenance margin is USD 1100. If the next day the price of the GBP goes to USD 1.65:
the value of the seller's account goes to USD 4610 and no margin call is made. | ||
the value of the seller's account goes to a deficit of USD 1640 and the seller must add USD 1640 to the account. | ||
the value of the seller's account goes to a deficit of USD 1640 and the seller must add USD 3125 to the account. | ||
the value of the seller's account goes to a deficit of USD 1640 and the seller must add USD 2740 to the account. | ||
None of the answers provided is correct. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started