Financial Derivatives
An investor enters into a long position in two April 2021 gold futures contracts. A contract is
for the delivery of 100 ounces. The initial margin is $2,500 per contract and the maintenance
margin is $2,000 per contract. The futures price when the investor enters the contracts is $800
per ounce.
1) What would be the margin call if the futures price of gold reaches $796 per ounce?
2) What would be the margin call if the futures price of gold reaches $790?
3) In which situation could the investor withdraw $1,250?
Homework Answers
Request Answer!
We need at least 10 more requests to produce the answer.
0 / 10 have requested this problem solution
The more requests, the faster the answer.
Suppose that you bought two one-year gold futures contracts when the one-year futures price of gold...
Suppose that you bought two one-year gold futures contracts when the one-year futures price of gold was US$1,340.30 per troy ounce. You then closed the position at the end of the sixth trading day. The initial margin requirement is US$5,940 per contract, and the maintenance margin requirement is US$5,400 per contract. One contract is for 100 troy ounces of gold. The daily prices on the intervening trading days are shown in the following table. Day Settlement Price 0 1340.30 1...
2. An investor enters into a futures contract covering 100 ozs. of gold. At the time the underlyi...
2. An investor enters into a futures contract covering 100 ozs. of gold. At the time the underlying price of gold is $1,525 per ounce. At the end of the year the investor is still holding the contract and the underlying price of gold under the contract is $1,450 per ounce. On March 1, of the following year, the investor takes delivery of 100 ozs. of gold under the contract when the price of gold is $1,400 per ounce. A....
You are long 20 gold futures contracts, established at an initial settle price of $1,512 per...
You are long 20 gold futures contracts, established at an initial settle price of $1,512 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,506, $1,502, $1,507, and $1,517, respectively. Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit...
Assume that futures contracts have zero initial margins and no daily margin calls. That is, you...
Assume that futures contracts have zero initial margins and no daily margin calls. That is, you pay nothing or get nothing when you enter a position in the futures contracts. You pay the entire futures price when you accept delivery of the underlying asset. You get the entire futures price when you make delivery of the underlying asset. Lastly, you pay your entire loss or get your entire profit on your futures position when you close the position with an...
Problem 14-12 Marking-to-Market (LO2, CFA2) You are long 24 gold futures contracts, established a...
Problem 14-12 Marking-to-Market (LO2, CFA2) You are long 24 gold futures contracts, established at an initial settle price of $1,524 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,518, $1,514, $1,519, and $1,529, respectively. Compute the balance in your margin account at the end of each of the four trading days,...
The futures price of gold is $1,000. Futures contracts are for 100 ounces of gold, and...
The futures price of gold is $1,000. Futures contracts are for 100 ounces of gold, and the margin requirement is $3,000 a contract. The maintenance market requirement is $1,500. A speculator expects the price of gold to rise and enters into a contract to buy gold. a. How much must the speculator initially remit? b. If the futures price of gold rises to $1,005, what is the profit and return on the position? c. If the futures price of gold...
Riverbed Jewelry Co. uses gold in the manufacture of its products. Riverbed anticipates that it will...
Riverbed Jewelry Co. uses gold in the manufacture of its products. Riverbed anticipates that it will need to purchase 530 ounces of gold in October 2020, for jewelry that will be shipped for the holiday shopping season. However, if the price of gold increases, Riverbed's cost to produce its jewelry will increase, which would reduce its profit margins. To hedge the risk of increased gold prices, on April 1, 2020, Riverbed enters into a gold futures contract and designates this...
15.6. [Introductory Derivatives Sample Question 30] Determine which of the following is NOT a distinguishing characteristic...
15.6. [Introductory Derivatives Sample Question 30] Determine which of the following is NOT a distinguishing characteristic of futures contracts, relative to forward contracts. (A) Contracts are settled daily, and marked-to-market. (B) Contracts are more liquid, as one can offset an obligation by taking the opposite position. © Contracts are more customized to suit the buyer's needs. (D) Contracts are structured to minimize the effects of credit risk. (E) Contracts have price limits, beyond which trading may be temporarily halted. 15.7....
] Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce...
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
You are long 28 gold futures contracts, established at an initial settle price of $1,536 per...
You are long 28 gold futures contracts, established at an initial settle price of $1,536 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,525, $1,521, $1,531, and $1,541, respectively Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit...
Assume that futures contracts have zero initial margins and no daily margin calls. That is, you pay nothing or get nothing when you enter a position in the futures contracts. You pay the entire futures price when you accept delivery of the underlying asset. You get the entire futures price when you make delivery of the underlying asset. Lastly, you pay your entire loss or get your entire profit on your futures position when you close the position with an...
Problem 14-12 Marking-to-Market (LO2, CFA2) You are long 24 gold futures contracts, established at an initial settle price of $1,524 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,518, $1,514, $1,519, and $1,529, respectively. Compute the balance in your margin account at the end of each of the four trading days,...
Riverbed Jewelry Co. uses gold in the manufacture of its products. Riverbed anticipates that it will need to purchase 530 ounces of gold in October 2020, for jewelry that will be shipped for the holiday shopping season. However, if the price of gold increases, Riverbed's cost to produce its jewelry will increase, which would reduce its profit margins. To hedge the risk of increased gold prices, on April 1, 2020, Riverbed enters into a gold futures contract and designates this...
15.6. [Introductory Derivatives Sample Question 30] Determine which of the following is NOT a distinguishing characteristic of futures contracts, relative to forward contracts. (A) Contracts are settled daily, and marked-to-market. (B) Contracts are more liquid, as one can offset an obligation by taking the opposite position. © Contracts are more customized to suit the buyer's needs. (D) Contracts are structured to minimize the effects of credit risk. (E) Contracts have price limits, beyond which trading may be temporarily halted. 15.7....
]
Question 4 (10 marks) Suppose the spot price of gold is $1,500 per troy ounce today. The futures price of gold for delivery in 1 year is $1,530 per troy ounce. Assume that the one-year gold futures contract is correctly priced and there are no storage and insurance costs. Also assume that the risk-free rate is compounded annually and you can borrow and lend money at the risk-free rate. a). What is the theoretical parity price of a two-year...
You are long 28 gold futures contracts, established at an initial settle price of $1,536 per ounce, where each contract represents 100 troy ounces. Your initial margin to establish the position is $12,000 per contract and the maintenance margin is $11,200 per contract. Over the subsequent four trading days, gold settles at $1,525, $1,521, $1,531, and $1,541, respectively Compute the balance in your margin account at the end of each of the four trading days, and compute your total profit...
Most questions answered within 3 hours.
-
2. Use the following information in the table to answer the
following questions. (Numbers are in...
asked 3 minutes ago -
A martial artist is practicing breaking 5 boards. He is able to
break aboard with probability...
asked 3 minutes ago -
The rate constant of a first-order reaction is 2.95 × 10−4 s−1
at 350.° C. If...
asked 6 minutes ago -
The fuel economy of a 2011 Lexus RX 350 2wd 6 cylinder 3.5 L
automatic 5...
asked 11 minutes ago -
i.
the synthesized compund 2-bromo-butanal i have a IR peak at about
3200 and one at...
asked 11 minutes ago -
A
752 mL sample of water was placed in a 1000 gram pan of aluminum.
The...
asked 22 minutes ago -
1.In the context of chelation, what does binding strength mean?
What happens at the molecular level...
asked 15 minutes ago -
Describe two obstacles that makes fixing atmospheric nitrogen
difficult.
asked 34 minutes ago -
Evelyn incorporates her sole proprietorship, transferring it to
newly formed Papaya Corporation. The assets transferred have...
asked 21 minutes ago -
Assume that in a hydrogen atom, the electron circles the nucleus
in a circle of radius...
asked 29 minutes ago -
1 point) Given the significance level α=0.01 find the following:
(a) left-tailed z value z= (b)...
asked 23 minutes ago -
Calculate the expected value, the variance, and the standard
deviation of the given random variable X....
asked 25 minutes ago