The futures price of a commodity such as wheat is $4.00. The contracts are for 10,000
bushels. The margin requirement is $2,000 and the maintenance margin requirement is
$1,000. You expect the price of the commodity to fall and enter into a contract to sell.
1) How much is the contract worth and how much must you initially remit?
2) If the futures price falls to $3.94, what is the value of the contract? How much do you
have in your account?
3) If the futures price rises to $4.04, what is the value of the contract? How much do you
have in your account?
4) If the futures price continues to rise to $4.15, what will you have to do?

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ANSWER Lets break down each question To calculate the value of the contract and the initial margin r... View the full answer