Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An investor takes a long position in 1 November Gold futures contract on September 10 (Day 1). The contract size is 100 oz. The current

An investor takes a long position in 1 November Gold futures contract on September 10 (Day 1). The contract size is 100 oz. The current futures price is US$1800. The initial margin requirement per contract is US$5,000/contract and the maintenance margin is US$4,500/contract.

The following table shows the futures prices at the closing of next four days

Day

Price

1

1782

2

1817.64

3

1781.29

4

1808.01

Draw a table of Mark to Market (MTM) similar to the table in Example 2 in the teaching note.

Do you get a margin call at the close on day 1?

Do you get a margin call at the close on day 2?

Do you get a margin call at the close on day 3?

Do you get a margin call at the close on day 4?

Can you withdraw money from your account at the close on day 2? If yes, how much money can you withdraw now?

Can you withdraw money from your account at the close on day 4? If yes, how much money can you withdraw now?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Small Business Terms Financial Education Is Your Best Investment

Authors: Thomas Herold

1st Edition

1798900483, 978-1798900482

More Books

Students also viewed these Finance questions