For all problems assume an eective monthly interest rate of 1% unless otherwise indicated in the problem.

3. In the CMEs silver futures market, the current silver price is $33.41 per troy ounce, and the contract size is 5000 troy ounces

(a) If a hedge fund wanted to be long $835,250 worth of silver futures, how many contracts should they buy?

(b) If the CME requires an 12% initial margin, how much does the hedge fund need to post in the margin account?

(c) If the price of silver closes tomorrow at $33.50 per troy ounce, what is the balance in the margin account?

(d) Assuming the account earns no interest and the broker requires margin maintenance of 70% of initial margin, what is the highest silver price that will trigger a margin call