Question
XYZ Inc. decides to use aluminum futures contracts to fully hedge a payment of 125 tons of aluminum that's due in four days. Each futures
XYZ Inc. decides to use aluminum futures contracts to fully hedge a payment of 125 tons of aluminum that's due in four days. Each futures contract has 25 tons of aluminum attached and carries an initial and maintenance margin of $3400 and $2500, respectively. The futures price was $1625/ton the day XYZ opened its futures position. The table below shows the futures prices for the four days immediately after XYZ opened its position.
Day 1 | Day 2 | Day 3 | Day 4 |
$1627 | $1622 | $1616 | $1621 |
Find XYZ's ending margin balance on Day 2. Assume deficits are eliminated to keep the position open and excesses remain in the account.
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