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Sonny Jim entered into the long position of 12 S&P 500 futures contracts. His brokerage account requires him to set up an initial margin of
Sonny Jim entered into the long position of 12 S&P 500 futures contracts. His brokerage account requires him to set up an initial margin of 15% of the notional amount of his position. Further, he has a maintenance margin requirement equal to 80% of the initial margin balance. Margin balances are settled on a weekly basis and the current continuously compounded risk-free interest rate is 6% The S&P 500 index futures prices are: Current: 2,427 At the end of the first week: 2.365 At the end of the second week: 2,385 Determine the margin balance at the end of the second week **Note that for S&P 500 futures contracts, the contract unit is fixed at 250
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