You are hedging your banks securities portfolio using 10-year T-Bond futures. Each contract is valued at $1M and requires a 5% initial margin and has a 3% maintenance margin. In order to adequately hedge against interest rate increases hurting the portfolio value you must get into 100 contracts (or $100M worth of futures) where you agree to sell the T-Bonds for $1M.

A. What equity amount would you have to put up initially to get into the contracts?

B. If the futures are marked-to-market daily and the contract values go to $900,000 what would be your equity value? Would you have a margin call? If so, for how much?

C. If the futures are marked-to-market daily and the contract values go to $1,100,000 what would be your equity value? Would you have a margin call? If so, for how much?