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[answered] 1.) Briefly describe what a futures contract is. 2.) What i


If you could help me with these Finance homework problems.?


1.) Briefly describe what a futures contract is.

 

2.) What is the difference between initial margin and maintenance margin

 

on a futures contract?

 

3.) One futures contract on orange juice is equal to 15,000 lbs. of juice.

 

Recently, the contract was trading at around $ 1.46/lb. The initial

 

margin for an orange juice contract is $1,320, approximately what is

 

the leverage an investor enjoys by trading this commodity?

 

4.) On Nov. 28, 2016, the nearby S&P 500 contract closed at 2200.80.

 

What was the total value represented by one S&P contract as of the

 

day of that close?

 

5.) If you think the S&P index is likely to go up in the near future, would

 

you buy or sell an S&P futures contract?

 

6.) Assume that in two weeks, the contract closes at 2250. What would be

 

the dollar amount of your profit or loss, given the action you answered

 

for part b? Explain how you arrived at your answer.

 

7.) Currently, the initial margin requirement for an S&P futures contract is

 

$28,125, and the maintenance margin requirement is $22,500.

 

Given the profit you found in part c, calculate your percentage profit on

 

the trade, given what you had invested (the initial margin

 

requirement).

 

8.) Assume now that the trade went against you, i.e., the price of the

 

contract goes down instead of up. At what contract price would you

 

have gotten a margin call? Explain. How much additional margin will

 

you need to deposit in your account?

 

Explain.

 


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