Suppose you sold a 5,000-bushel July Wheat futures contract at $7.00 per bushel. At the end of the day, your short position remains open and the July Wheat futures contract has a daily settlement price equal to $6.75 per bushel. The risk-free rate is 1.0 percent (1.0%). What is the daily mark-to-market profit or loss on your short position in the Wheat futures contract?

What is the Notional Value of the Wheat Futures contract?

If the Initial Margin requirement for the Wheat futures contract is $2,100, then what is the leverage ratio when you open your short futures contract position?

What is the rate of return on the equity (initial margin requirement) in your position?

Answer rating: 100% (QA)

SOLUTION Notional Value of the Wheat Futures contract 5000 x 700 35000 Initial Margin requirement 21... View the full answer