What will happen to your margin account

Assignment Help Microeconomics
Reference no: EM13692510

The current price of gold is $1,800 an ounce, and the current futures price is 1,850 an ounce. Suppose you expect the price of gold to rise and you enter a long position into a future contract to buy gold. Assume that each gold contract is for 100 ounces of gold, the initial margin requirement is 10% and the maintenance margin is 5%.

(a) What is the amount that you must deposit (either in cash or in securities) into your margin account to open the future contract?

(b) Suppose that the price of the future contract increases by 1%. What will happen to your margin account?

(c) Suppose that the price of the future contract falls to $1750. What will happen to your margin account? What if anything must you do?

Reference no: EM13692510

Questions Cloud

Determine the equilibrium price and quantity : Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 ..
What factors determine the job finding rate : Explain the role of labor supply and labor demand in determining the incentives to return to equilibrium. Explain why unemployment falls when output rises. In the process, mention what happens to unemployment. What factors determine the job finding r..
Indifference curve and budget line to analyze the behavior : Make an indifference curve and budget line to analyze the behavior the choice of leisure time and hours of work of employees who are paid:
What will happen to your margin account : The current price of gold is $1,800 an ounce, and the current futures price is 1,850 an ounce. Suppose you expect the price of gold to rise and you enter a long position into a future contract to buy gold.
Economy has consumption function-equilibrium real gdp : An economy has a consumption function of C=10+.8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M=.1Y. What i equilibrium real GDP?
Assume the economy is initially in a short-run equilibrium : Assume the economy is initially in a short-run equilibrium at a level of output below full employment. Use the IS-LM model to graphically illustrate: 1. how the economy will adjust in the long-run if the no-policy action is taken. 2. if fiscal policy..
What is the multiplier for this economy : An economy has a consumption function of C= 10 + .8Y, investment of 6, government expenditure of 10, exports of 10, and an import function of M=.1Y What is the multiplier for this economy?
After an extensive analysis of political currents : After an extensive analysis of political currents in Central and South America, you conclude that coffee prices will be lower in the future. The current futures price for coffee is $2.10 and each contract is for 37,500 pounds of coffee.

Reviews

Write a Review

Microeconomics Questions & Answers

  Computing the expected dividends

New Light Corporation has just created a solar panel capable of generating 200 percent more electricity than any solar panel currently on the market. As a result, New Light is expected to experience a 15% yearly growth rate for the next 5 years.

  What money supply must the fed set next year if it wants to

suppose this years money supply is 800 billion ngdp d 20 trillion and real gdp is 8 trilliona. what is the price level?

  When the production of a good generates external benefits

Which of the following increases the political power of special interest groups and makes counterproductive government action more likelyA car sells at different prices at different dealerships in a local market. If a consumer has imperfect informa..

  What is owed after the first two years of payments

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 ..

  What are the characteristics of martian firms

Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe

  If money is worth 5 percent what is the equivalent present

A $90,000 investment is made. Over a 5 year period, a return of $30,000 occures at the end of the first year. Each successive year yields a return that is 10 percent less than the previous year's return. If money is worth 5 percent, what is the equiv..

  A firm has a long-run cost function cq 4q2 4 in the long

a firm has a long-run cost function cq 4q2 4. in the long run this firm will supply a positive amount of output as

  Why does a perfectly competitive firm maximize revenues

Why does a perfectly competitive firm maximize revenues where P=MC? Why is P=MR in this market type? Name a business you think belongs in this category. Why? Be sure you think about all of the assumptions about firms in this industry

  What is the economic cost of jens business

Jen left a job paying $75,000 per year to start her own florist shop in a building she owns. The market value of the building is $100,000. She pays $30,000 per year for flowers and other supplies

  Explain why and how might education have externality

a why and how might education have externality effects?b in our discussion of education and wages we assumed that

  Provide support from the learning resources

Provide support from the Learning Resources.

  Develop financial portfolio for the family choose five

create a financial portfolio for your family. pick five stocks and decide if you will be investing for the long or

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd