Question 2

Suppose you take a short position in a three-month futures contract on 2 500 kilograms of

Fine Wool at a futures price of 1 010 cents per kilogram. You are required to deposit R19

000 into a margin account and you are informed that the maintenance margin is R13 000.

2.1 Calculate the spot price of Fine Wool that will trigger a margin call.

2.2 Calculate the spot price of Fine Wool that will allow R6 000 to be withdrawn from

the margin account.

2.3 What would happen if a margin call was not met?