The futures price | Business & Finance homework help

P1. The futures price of corn is $2.00. The contracts are for 10,000 bushels, so a contract is worth $20,000. The margin requirement is $2,000 a contract, and the maintenance margin requirement is $1,200. A speculator expects the price of the corn to fall and enters into a contract to sell corn.

a. How much must the speculator initially remit?
b. If the futures price rises to $2.13, what must the spectator do?
c. If the futures price continues to rise to $2.14, how much does the speculator have in the account?

P2. The futures price of gold is $1,050. Futures contracts are for 100 ounces of gold, and the margin requirement is $5,000 a contract. The maintenance margin requirement is $1,500. You expect the price of gold to rise and enter into a contract to buy gold.

a. How much must you initially remit?
b. If the futures price of gold rises to $1,055, what is the profit and percentage return on your investment?
c. If the futures price of gold declines to $1,048 what is the loss and percentage return on the position?
d. If the futures price falls to $1,038, what must you do?
e. If the futures price continues to decline to $1,101, how much do you have in your account?
f. How do you close your position?

P3. The futures price of British pounds is $2.00. Futures contracts are for 10,000, so a contract is worth $20,000. The margin requirement is $2,000 a contract and the maintenance market requirement is $1,200. A speculator expects the price of the pound to fall and enters into a contract to sell pounds.

a. How much must the speculator initially remit?
b. If the futures price rises to $2.13, what must the speculator do?
c. If the futures price continues to rise to $2.14, how much does the speculator have in the account?

6. You expect the stock market to decline, but instead of selling stocks short, you decide to sell a stock index futures contract based on an index of New York Stock Exchange common stocks. The index is currently 600 and the contract has a value that is $250 times the amount of the index. The margin requirement is $2,000 and the maintenance margin requirement is $1,000.
a. When you sell the contract, how much must you put up?
b. What is the value of the contract based on the index?
c. If after one week of trading the index stands at 601, what has happened to your position? How much have you lost or profited?
d. If the index rose to 607, what would you be required to do?
e. If the index declined to 595 (1 percent from the starting value), what is your percentage profit or loss on your position?
f. If you had purchased the contract instead of selling it, how much would you have invested?
g. If you had purchased the contract and the index subsequently rose from 600 to 607, what would be your required investment?
h. Contract your answers to parts (d) and (g).

7. One use for futures markets is “price discovery,” that is, the futures price mirrors the current consensus of the future price of the commodity. The current price of gold is $950 but you expect the price to rise to $1,000. If the futures price were $990, what would you do? If your expectation is fulfilled, what is your profit? If the futures price were $1,018, what would you do? What futures price will cause you to take no action? Why?

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency