The S&P 500 index is currently at 1500. You decide to enter into 20 S&P...
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The S&P 500 index is currently at 1500. You decide to enter into 20 S&P 500 futures contract. Each contract permits delivery of 250 units of the index exactly 3 months from now. The initial margin is 10% of the notional value, and the maintenance margin is 75% of the initial margin. We suppose that you earn a continuously compounded return of 5% on your margin balance. The position is market-to-market on a daily basis. 1) We suppose that one day later, the S&P 500 index increase to 1505 Find the new balance of the margin account. 2) We suppose that one day later, the S&P 500 index drops to 1450 which may require a margin call. Calculate the amount of the margin call (if any)
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