Problem 3: An investor sold six contracts of June/2018 corn. The price per bushel was...
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Finance
Problem 3:
An investor sold six contracts of June/2018 corn. The price per bushel was $1.62, and each contract was for 5000 bushels. The initial margin deposit is $3000 per contract with the maintenance margin at $2250.
The contract is sell contract, meaning it will gain if the price falls and lose if price increases.
The price per bushel is $1.62, so for 5000 bushels it will be 50001.64 = $8100 and for 6 contracts it will be 8100 6 = $48600
How much did the investor have to deposit on the investment?
The investor had to deposit ($3000 6)= $18000 on the investment since there are 6 contracts.
The prices of the futures on the four days following the short sales were 1.58, 1.60, 1.66, and 1.70. Calculate the current balance on each of the next four days.
If the investor closed out her position at the end of the fourth day, what was her final gain or loss over the four days in dollars and as a percentage of investment?
If the investor kept her position, and the futures price on the fifth day was 1.80, would the investor face a margin call? If yes, how much would she need to put up?
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