Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The investor takes a long position in two futures contracts for orange juice. Each contract amounts to 15000 units of the underlying. The current contract

The investor takes a long position in two futures contracts for orange juice. Each contract amounts to 15000 units of the underlying. The current contract price is 1.60 PLN / unit of the underlying. The initial margin is 6000 PLN per contract while the maintenance margin is 4500 PLN per contract. Both margins are constants! a) What price change of the contract will cause a margin call? b) Under what circumstances will the investor be able to withdraw 2000 PLN from the deposit account without closing the position? c) What should the price on the underlying (spot) market be so that the investor would have a profit at the time of exercising the contract? Explain shortly the role of margins.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Complete Direct Investing Handbook

Authors: Kirby Rosplock

1st Edition

1119094712, 978-1119094715

More Books

Students also viewed these Finance questions

Question

=+independent, then E[ F(Y)] + E[G(X)] = 1+ P[X=Y].

Answered: 1 week ago

Question

2. Develop a persuasive topic and thesis

Answered: 1 week ago

Question

1. Define the goals of persuasive speaking

Answered: 1 week ago