Louis deposits $80,000 of margin and takes a short position in 80 corn futures contracts, covering 5000
Question:
Louis deposits $80,000 of margin and takes a short position in 80 corn futures contracts, covering 5000 bushels each, on Monday. Louis' trade price and the closing futures price on Monday are both $3.9050 per bushel. The initial and maintenance margins are $1000 and $800, respectively, per contract. The daily interest rate is 1.1 basis points per day on Monday and Tuesday and 1.2 bp per day on Wednesday. There are no transaction costs.
On Tuesday, Wednesday and Thursday, the closing futures prices are $3.8575, $3.9925, and $3.8875 per bushel, respectively. Assume that Louis meets any margin call received each of the three days. Find Louis' margin account balance Thursday after the market closes and any margin call is met.
Here is the solution my professor provides:
The balance calculations and margin call determination are similar to those in Futures margin call 2 above, among other examples, but need to be done every day to find the starting balance for the following day. The daily ending balances are:
Day | Per contract, pre-call | Total, pre-call | Per contract, final | Total, final | ||||
Tuesday | $1237.6100 | $99008.8000 | $1237.6100 | $99008.8000 | ||||
Wednesday | $562.7461 | $45019.6910 | $1000.0000 | $80000.0000 | ||||
Thursday | $1525.1200 | $122009.6000 | $1525.1200 | $122009.60 |
Correct answer: 122009.6 (±0.05)
My question is how was the Wednesday and Thursday per-contract result calculated?
Introduction to Derivatives and Risk Management
ISBN: 978-1305104969
10th edition
Authors: Don M. Chance