Remark: No hand written, please do in typing format.

Question 4.

1. Discuss how margin payments protect the clearing house. (4 marks)
2. Logan deposited RM9,000 as margin to buy two FCPO contracts at a price of RM2,200 per metric ton. At the end of the day, the FCPO price settle at RM2,250. Logan decides to hold the position until Day 2. On Day 2, the FCPO price went up to RM2,320 and Logan decided to realise his profit by closing his position.

1. Calculate the cash position of Day 1. (3 marks)
2. Compute Logans realised profit on Day 2. (3 marks)

c. Aluna deposited RM13,500 as margin to buy three FCPO contracts at a price of RM2,000 per metric ton. At the end of the day, the FCPO price settle at RM1,970. Aluna decides to hold the position until the next day anticipating the price might goes up again. On Day 2, price of the FCPO increases to RM2,150, thus Aluna still hold on to her investment. On Day 3, the market declines and FCPO price drops to RM2,040 and she decides to sell and close out her FCPO position.

1. Calculate the cash position of Day 1. (2 marks)
2. Compute Alunas cash balances on Day 2. (3 marks)
3. Calculate Alunas profit / (loss) from her futures trading. (3 marks)