Question: Consider the Mark-to-Market Settlements for 1 gold futures contracts maturing in 5 months. Assume that the risk-free rate available to investors is 6% per annum
Consider the Mark-to-Market Settlements for 1 gold futures contracts maturing in 5 months. Assume that the risk-free rate available to investors is 6% per annum with quarterly compounding and that no arbitrage relationship between spot and futures prices (Futures-Spot parity) with continuous compounding holds in all months. Also assume that the initial margin is $18,000 per contract, while the maintenance margin is $6000 per contract
| Month | Spot Price End of Month(S) | Futures Price, End of Month (F) | Change in Futures Price | Contract Size (ounces) | Buyer/Long Position | Seller/Short Position | ||
| Contract Initiated | 0 | 1307.00 | 1339.84 | -- | 100 | (c) | (c) | Initial Margin |
| 1 | 1309.00 | 1335.25 | (b) | 100 | (c) | (c) | Monthly Adjustments | |
| 2 | (a) | 1336.76 | (b) | 100 | (c) | (c) | ||
| 3 | 1332.00 | 1345.29 | (b) | 100 | (c) | (c) | ||
| 4 | 1325.00 | (a) | (b) | 100 | (c) | (c) | ||
| Delivery | 5 | (a) | 1321.00 | (b) | 100 | (c) | (c) | |
| (c) | (c) | Account Bal. Month 5 |
For the questions below answers must contain at least three digits after the decimal point.
- In the table above, show your answers in the cells marked by “a” (10 pts)
- In the table above, show your answers in the cells marked by “b” (9 pts)
- In the table above, show your answers in the cells marked by “c” (9 pts)
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