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Future new position value

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Gold price today is $1445; the future price that expires in 6 months (June 2020) is $1460 per ounce. You believe the price of gold will go up over the next 6 months. So, you will buy one futures contract that expires in June 2020. There are 100 ounces of gold in each futures contract and margin requirement for gold future is $35oo per contract.

a) What's your future's initial position value when you buy this future contract?

b) If 6 months later, the price of gold goes up to $1470, what's the future's new position value?

c) What's your return on investments (ROI) from the trade?

d) What's the basis of the June 2020 futures?

e) If the risk-free rate is 3%, what's the gold future price for June 2020 according to the spot future parity?

Reference no: EM132473766

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