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One of the unique features of futures contracts is that they have only one source of retum-the capital gains that can acerue when price movements have an upward bias. Remember that thore are no current cash flows associated with this finencial asset. Theso instruments are known for their volablity due to swings in prices and the use of leverage upon purchase. With futures trading done on margin, small amounts of capital are needed to control relatively large investment positions. Assume that you are interested in investing in commodity futures-specifically, oats futures contracts. Raler to the contract terms of oats: "OATS (CBOT) 5000 bu; cents per bushel." Suppose you had purchesed five December cats contracts at the settlement price of 180.89 . The required amcunt of investor capital to be deposited with a broker at the time of the initial transaction is 5.47% of a contract's value. Arswer the following questions conceming the investment in futures contracts. a. What is the total amount of your initial margin for the five contracts? b. What is the total amount of bushels of oats that you control? c. What is the purchase price of the outs commodity contracts you control according to the December setfement date? d. Assume that the December oats actually settled at 180.89 , and you decide to sell and thke your proft. What is the solling price of the oats commodity contracts? e. Caloulate the retum on invested capital eamed on this transaction. (Remember that the retum is based on the amount of funds actually invested in the contract rather than on the value of the contract itseif.) a. The total amount of your initial margin for the five contracts is : (Round to the nearest cent.)

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