Explain differences between futures and forward markets

Reference no: EM131948626

Question: You bought an October futures contract on petroleum at $42.50 per barrel. One contract represents 1.000 barrels of petroleum. Initial margin on the contract was $1688.8. Maintenance margin is equal to $1200.By the end of the day the price had increased to $43.00 per barrel.

- Will you get a margin call? If yes, how much money will you have to deposit? If no. can you withdraw any money? How much?

- If you are a speculator, when would you enter in this position?

- What would be the return on your investment if you shorted futures contracts at a futures price of $42.50 and later closed your position at $43 per barrel?

- As a speculator, could you take a position in the forward market? What are the main differences between futures and forward markets?

Reference no: EM131948626

Questions Cloud

What is the monthly mortgage payment : You just bought a house and have taken out a 20-year $150,000 mortgage to be paid monthly over the life of the loan. You negotiated for a 9% APR on the mortgage

What is the book value of liquid assets : Brad's Company has equipment with a book value of $500 that could be sold today at a 50% discount. Its inventory is valued at $450.

What would be your total real return on investment : You bought one of Rocky Mountain Manufacturing Co.'s 8.25 percent coupon bonds one year ago for $1,045.80. These bonds make annual payments and mature ten years

What is current ratio-debt ratio-total asset turnover ratio : What is the current ratio, debt ratio, total asset turnover ratio of the firm? What is the return on equity?

Explain differences between futures and forward markets : As a speculator, could you take a position in the forward market? What are the main differences between futures and forward markets?

Determine their effects on accounting equation : Analyze transactions (a)–(e) to determine their effects on the accounting equation.

What is the yield to maturity on the bond issue : Your boss has indicated that he would like your help in determining the value of a bond issue currently under review. The firm has bonds outstanding.

Find effective rate of compound interest rate or investment : Find the effective rate of the compound interest rate or investment.

Result of the decision to issue debt : How much will Ruiz save in taxes, per year, as a result of the decision to issue debt?

User Account

All Pages