Question

1. You are shopping for a loan, and a bank quotes you a rate of 6% (expressedas an APR with continuous compounding). The loan amount is $100,000 and requiresmonthly interest payments. The loan principal will not be paid until the loan maturityin 10 years. What would be the monthly interest payment that you would have tomake on this loan?

2. A few days ago, you entered into 5 futures contracts to buy a stock index at $3,323. Your initial margin was exactly 10% of the value of the transaction. Now, a few days into the contract, the settlement price is $3,225 and you are receiving a margin call asking for additional funds to be posted. What could be the (minimum) maintenance level?

Answer 1

1. Monthly interest payment = $100,000 * (e^{0.06 * 1/12} - 1)= $10000*(e^0.005 -1) = $501.25

I can only answer 1 question at a time so I am solving question 1. Please do rate me and mention doubts in the comments section.