Questions 6 and 7 below are based on the following information and assumptions:

AAA takes a long position in 1 futures contract on Coffee.

BBB takes a Short position in 1 futures contract on Coffee.

The futures contract has contract size = 100 units (multiplier). The value of 1 futures contract is $10,000 (= $100 *100).

The Margin Account is 10% of the value of a futures contract, i.e., the Margin Requirement is $1000 (This is also the Initial Margin).

The Maintenance Margin = 75%*$1000 = $750

Assume that AAA or BBB will meet all margin calls. The following table provides information of Futures Price () from Time 0 to 3:

Time t	Future Price (Ft)	Change in Dollar Value of One Futures Contract from time t-1 to t (note: each contract has multiplier = 100)
Time 0	$100	0
Time 1	$103	= +$3*100 = +$300
Time 2	$99	= -$4*100 = -$400
Time 3	$95	= -$4*100 = -$400

6. Given the above information, when does AAA (with Long position in futures) experience a Margin Call?

(A) AAA experiences margin calls at Time 2 and Time 3

(B) AAA experiences a margin call at Time 3 only

(C) AAA experiences a margin call at Time 1 only

(D) AAA does not experience any margin call from Time 1 to Time 3

7. Given the above information, when does BBB (with Short position in futures) experience a Margin Call?

(A) BBB experiences a margin call at Time 1 only

(B) BBB experiences a margin call at Time 1 and Time 2

(C) BBB experiences margin calls at Time 3 only

(D) BBB does not experience any margin call from Time 1 to Time 3

8. When the Spot Price is lower than the Futures Price, the market is in:

(A) Backwardation

(B) Financial crisis

(C) Contango

(D) None of the above