Tim has taken a long position in 50 contracts of oil. Each contract is for the delivery of 1000 barrels of oil at a price of 78 per barrel one year from now. The initial margin is 5% of the notional value, and the maintenance margin is 90% of the initial margin. Suppose the continuously compounded risk-free interest rate is 4% per year, and Tim earns an interest rate of 3% on his margin balance. The position is marked-to-market on a monthly basis. One month later, on the day of first marking-to-market, the oil price drops to 77.9 per barrel. Find the minimum possible oil price on the day of the second marking to market so that Tim is not required to make additional deposit to his margin account. Solution: 78.1041. Tim has taken a long position in 50 contracts of oil. Each contract is for the delivery of 1000 barrels of oil at a price of 78 per barrel one year from now. The initial margin is 5% of the notional value, and the maintenance margin is 90% of the initial margin. Suppose the continuously compounded risk-free interest rate is 4% per year, and Tim earns an interest rate of 3% on his margin balance. The position is marked-to-market on a monthly basis. One month later, on the day of first marking-to-market, the oil price drops to 77.9 per barrel. Find the minimum possible oil price on the day of the second marking to market so that Tim is not required to make additional deposit to his margin account. Solution: 78.1041