QUESTION 2

1. This is a problem that has three questions. Therefore, please choose three answers (one choice for each question) to get full credit for this questions, otherwise you will only get partial points.

   Consider an investor who contacts his/her broker on June 5^th to enter into short position on 3 December soybean futures contract.

   Each contract size is 50lbs. Initial margin requirement is $5000 per contract and maintenance margin requirement is $3750 per contract. Suppose that current futures price is $1250 per pound.

   Using the daily settlement process, please answer the questions #1 - #3.

   date	futures price			loss/gain			Acct bal. (after adjusting margin call)	Margin call
   5-Jun	$1,250	/lbs
   	$1,240	/lbs
   6-Jun	$1,235	/lbs
   7-Jun	$1,215	/lbs
   8-Jun	$1,245	/lbs
   				total cum.loss/gain=

   #1. Are there any margin calls? If so, when and by how much?

   #2. How much is the total cumulative loss/gain for this account?

   #3. What is the appropriate account balance at the end of June 6th, which is the highlighted part in the table above?

   		#1. no, there are no margin calls.
   		#1. yes, there is a margin call on June 7th, by $2250
   		#1. yes, there is a margin call on June 5th, by $4500
   		#2. total cumulative gain = + $750
   		#2. total cumulative loss = -$750
   		#2. total cumulative gain = +1500
   		#2. total cumulative loss = -$1500
   		#3. June 6th account balance = $17,250
   		#3. June 6th account balance = $15,750
   		#3. June 6th account balance = $20,250