You have decided to purchase 25 oil futures contracts at a settle price of $55 per barrel.

Question:

You have decided to purchase 25 oil futures contracts at a settle price of $55 per barrel. Each futures contract has a standard size of 1,000 barrels and an initial margin requirement of $5,500.

a. What is the leverage factor associated with these contracts?

b. If oil rises to $56.25 per barrel, what is the total percentage return on your futures position?

c. What is the total percentage return on your futures position if oil falls to $54 per barrel?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals Of Investments Valuation And Management

ISBN: 9781266824012

10th Edition

Authors: Bradford Jordan, Thomas Miller, Steve Dolvin

See More Books

Question Posted: Jan 02, 2024 05:41 AM

See More Questions

You have decided to use futures contracts to invest in silver at a settle price of $15 per ounce. Each futures contract has a standard size of 4,400 troy ounces and an initial margin requirement of...
Given the information in the previous problem, what is the leverage factor associated with these contracts. If silver rises to $17 per ounce, what is your total percentage return? Problem 17.6 You...
Derby Chips is an international producer of corn chips. At the end of 2006, Mary Hahn, president of Derby, appointed a task force to focus on the packaging and product use segments of its products...
You are given the equation(s) used to solve a problem. For each of these, you are to a. Write a realistic problem for which this is the correct equation(s). b. Finish the solution of the problem.
Consider the system shown in figure(a) Determine its impulse response h(n).(b) Shown that h(n) is equal to the convolution of the following signals.h1(n) = ?(n) + ?(n - 1)h2(n) = (1/2)n u (n) x(n)...
Alan Waung, a Hong Kong businessperson, purchased a golf course in Saginaw, Michigan, as an investment. As an avid golfer, Alan anticipates spending several weeks during the year at his "Northern...
Raster Imaging Company has a new management team that has developed an operating plan to improve upon last year's ROE. The new plan would place the debt ratio at 55 percent, which will result in...
Chocolates has observed the following overhead costs for the past 12 months: The results of the regression analysis are: TC = $8,781 + ($0:63 Ã Number of Boxes) a. Plot the data and the...
Riverbed Limited uses a perpetual inventory system. The inventory records show the following data for its first month of operations Explanation Units Unit Cost/Price Date Total Cost Balance in Units...
Why do agency bonds carry a higher yield than comparable U.S. Treasury bonds?
Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates: a....
Aniline, a starting compound for urethane plastic foams, consists of C, H, and N. Combustion of such compounds yields CO2, H2O, and N2 as products. If the combustion of 9.71 mg of aniline yields 6.63...
Your company uses Azure Virtual Desktop ( AVD ) and plans to implement MSIX app attach for AVD. Where does MSIX app attach store application files? Select only one answer. A Kubernetes container A...
Write a MatLab program in which the guessing game from below is modified to allow the user to guess up to 4 times. If the number wasn't guessed correctly after the 4 tries, tell the user what the...
In a typical flume configuration file, which entity specifies HDFS location in which data is written? SELECT THE CORRECT ANSWER source sink channel agent
for (i=0; i <1000; i++) { } if ((i mod 2) ==0) { } a) The code results in at least two conditional branches. Using a one-bit predictor for branch prediction, what is the prediction accuracy for the...
Which of the following fixed point iterations n+1 = g(n) will converge. Comment about their rate of convergence based on g'(a). You can get rough idea of what a is within a few iterations. (a) n+1 =...
Which region has a comparative advantage in the following goods: a. Wheat: Colombia or the United States? b. Coffee: Colombia or the United States? c. Timber: Iowa or Washington? d. Corn: Iowa or...
Gordon and Lisa estimate that they will need $1,875,000 in 40 years for their retirement years. If they can earn 8 percent annually on their funds, how much do they need to save annually?
Acme Corporation is a highly profitable closely held corporation that has never paid a dividend. During the past five years, after-tax earnings of $200,000 per year have been retained in the...
In terms of a corporations incurring liability for the tax, what is the difference between the personal holding company tax and the accumulated earnings tax? Do both taxes require a tax avoidance...
Why are controlled groups of corporations required to apportion among group members the lower rates applicable to taxable income up to $75,000?
The student must obtain a news item and/or article in which a company has developed a security measures plan. Determine the measures that were considered and the risks contemplated. Provide some...
Consider the function U (p,b) = 2ln (p) + In (b) (a) Find the unconstrained maximum of the function (b) Now, suppose that the maximization is subject to the constraint 2p+36=24. What is the...
After carefully reading The Great Inventory Correction case beginning on page 187 of the Simchi-Levi, et. al (2022) text and performing a thorough review of relevant literature, you will be assuming...

You have decided to purchase 25 oil futures contracts at a settle price of $55 per barrel.

Question:

Step by Step Answer:

a Margin percent 55001000 55 1000 or 1000 Leverage 110 10x Cash re...View the full answer

Fundamentals Of Investments Valuation And Management

Students also viewed these Business questions