Assume the current spot price for crude oil is $65.25 per barrel and the futures

price for crude oil is $65.30 per barrel. A futures contract is for 1000 barrels.

On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are

speculators in this futures market, whose initial margin requirement is $6,500 and

whose margin maintenance requirement is $5,000. For hedgers the initial

margin requirement is the same as the margin maintenance requirement. Assume that Stacey and

Ben will always keep the minimum required amount in their margin accounts. Also, assume

(artificially) that no marking to market is done on the expiration date of the contract.

On Tuesday, the spot price of oil is $64.00 per barrel and the price

of the crude oil futures closes at $64.04 per barrel.

3. As a result of marking to market, how much will need to be transferred at

the end of Tuesday from Stacey to Ben through their brokers and clearing-

house? (A negative amount means money needs to be transferred from Ben to Stacey.)

4. After the transfer in #3, how much will Stacey transfer into her margin account?

(If she has to transfer money out of her account, put in a negative amount. Also,

remember that Stacey wants to keep the minimum possible amount in her margin account.)

5. After the transfer in #3, how much will Ben transfer into his margin account? (A

negative answer means he transfers money out of his account.)

6. What will be Stacey's margin account balance at the end of Tuesday?

7. What will be Ben's margin account balance at the end of Tuesday?