Margin maintenance requirement

Assignment Help Financial Management

Reference no: EM131448502

Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels.

On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are speculators in this futures market, whose initial margin requirement is $7,500 and whose margin maintenance requirement is $5,500. For hedgers the initial margin requirement is the same as the margin maintenance requirement. Assume that Stacey and Ben will always keep the minimum required amount in their margin accounts. Also, assume (artificially) that no marking to market is done on the expiration date of the contract.

1. How much must Stacey deposit in her margin account in order to buy this futures contract?

2. How much must Ben deposit in his margin account in order to sell this futures contract?

Reference no: EM131448502

Questions Cloud

Assume the current spot price for crude oil : Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels. On Monday, Stacey buys one futures contract from Ben. How much does Stacey pay Ben for ..

What is the net interest income earned in dollars : Sun Bank USA has purchased a 8 million one-year Australian dollar loan that pays 15 percent interest annually The spot rate of U.S. dollars for Australian dollars is $0.6250/A$1. What is the net interest income earned in dollars on this one-year tran..

Common stock is expected to pay a dividend : risp Cookware's common stock is expected to pay a dividend of $2.25 a share at the end of this year (D1 = $2.25); its beta is 0.95; the risk-free rate is 3.4%; and the market risk premium is 4%. The dividend is expected to grow at some constant rate ..

What is chutes interest coverage ratio : Chutes & Co. has interest expense of $ 1.91 million and an operating margin of 11.4 % on total sales of $ 30.8 million. What is Chutes' interest coverage ratio?

Margin maintenance requirement : Assume the current spot price for crude oil is $66.65 per barrel and the futures price for crude oil is $66.70 per barrel. A futures contract is for 1000 barrels. On Monday, Stacey buys one futures contract from Ben. Both Stacey and Ben are speculato..

Describe key risk that could impact project : Describe a key risk (either one that is technical, external, or organizational) that could impact a project you are working on. Then, discuss if it has a High, Medium or Low probability of occurring and why. Next, determine if that risk happens what ..

Compute proceeds of both strategies : You want to invest $1,000,000,000 for one year. Assume the interest rate in the Australia is 6% and the interest rate in the United States is 1%. The current spot rate is AUD/$ 1.32 and the one-year forward rate is AUD/$ 1.3307. Would you prefer inve..

Full points rewarded homework problems : Full Points rewarded Homework Problems. ITs propiertorship, corporation, and partnership. Why are teams used for financial improvement of existing projects and analysis of new investments? What are the legal and financial differences among a proprito..

What lifestyle do you want in retirement : You are still in school and would like to visualize how you will save for your retirement. You can invest in stock funds which are expected to return 8.5% per year in nominal terms and bond funds which return 3.5% per year in nominal terms. how many ..

User Account

All Pages