Variation Margin 2. A futures contract's current price is $ 92.15. Initial margin is $11.25 per contract, the maintenance margin is $ 9.71 per contract. You are short 14 contracts. If you receive a margin call, at a minimum how much variation margin would be required? Forward contract valuation: Short position 3. Assume that you own a security currently worth $250. To hedge against a possible decline in price, you enter into a forward contract to sell the security in three months. The risk-free rate is 3.0 percent. You contract at the "No Arbitrage" forward price at t=0 and then two months hence spot is $243, what is your gain or loss on the forward? Open Interest 4. When one futures contract is traded at the exchange, the trade may result in the open interest increasing by one contract, staying the same, or decreasing by one contract. Explain. Valuation of forward on Index paying a Continuous dividend yield 5. In order to hedge against a potential price increase over the next 120 days, the portfolio manager decides to take a long position on a 120-day forward contract on the S&P500 stock index. Risk free rate is 5%. At t=0 the index is at 905. The present value of dividends to be received over the life of the contract is 10. [Contract multiplier is $1.] What is the "No arbitrage" forward price at t=0?