Question 3. Calculation of Margin Accounts Assume the following: (1) AAA takes a long position in 1 futures contract on Coffee; BBB takes a short position in the same) 1 futures contract. The futures contract is specified as follows: Contract size = 100 bags (multiplier) Futures Price (at time 0) = $100 (2) Given the above information, the value of 1 futures contract is $10,000 = $100 *100). (3) Assume that the Margin Account is 10% of the value of a futures contract, i.e., Initial Margin = 10%* $10,000 = $1000 The Margin Requirement is $1000 (This is also the Initial Margin). (4) Assume that the Maintenance Margin is 75% of the Initial Margin: Maintenance Margin = 75%*$1000 = $750 Instructions: Given the above information/assumption, calculate the changes in margin accounts of both AAA (long position) and BBB (the short position) for the scenario below. Identify any margin calls for AAA and/or BBB. Note: assume that both AAA and BBB will meet all margin calls and both traders will close their position at time 3. Timet Futures Price (Ft) Change in Dollar Value of One Futures Contract from time t-1 tot (note: each contract has multiplier = 100) Time 0 $100 Time 1 S104 = +$4*100 = +S400 Time 2 $99 =-$5*100 = -$500 Time 3 = -$3*100 = -$300 Question 3. Calculation of Margin Accounts Assume the following: (1) AAA takes a long position in 1 futures contract on Coffee; BBB takes a short position in the same) 1 futures contract. The futures contract is specified as follows: Contract size = 100 bags (multiplier) Futures Price (at time 0) = $100 (2) Given the above information, the value of 1 futures contract is $10,000 = $100 *100). (3) Assume that the Margin Account is 10% of the value of a futures contract, i.e., Initial Margin = 10%* $10,000 = $1000 The Margin Requirement is $1000 (This is also the Initial Margin). (4) Assume that the Maintenance Margin is 75% of the Initial Margin: Maintenance Margin = 75%*$1000 = $750 Instructions: Given the above information/assumption, calculate the changes in margin accounts of both AAA (long position) and BBB (the short position) for the scenario below. Identify any margin calls for AAA and/or BBB. Note: assume that both AAA and BBB will meet all margin calls and both traders will close their position at time 3. Timet Futures Price (Ft) Change in Dollar Value of One Futures Contract from time t-1 tot (note: each contract has multiplier = 100) Time 0 $100 Time 1 S104 = +$4*100 = +S400 Time 2 $99 =-$5*100 = -$500 Time 3 = -$3*100 = -$300