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
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?
This question was answered on: Sep 18, 2020
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