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Consider a hypothetical futures contract in which the current price is $212. The initial margin requirement is $10, and the maintenance requirement is $8. You go long 20 contracts and meet all margin calls but do not withdraw any excess margin.
a. When should there be a margin call?
b. Complete the table below and explain any funds deposited. Assume that the contract is purchased at the settlement price of that day so there is no mark-to-market profit or loss on the day of purchase. Day Beginning Balance Funds Deposited Futures Price Price Change Gain/Loss Ending Balance 0 212 1 211 2 214 3 209 4 210 5 204 6 202
c. How much are your total gains or losses by the end of Day 6?
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. Despite its broad customer bas..
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Jaguar, Inc. maintains a debt-equity ratio of .60 and follows a residual dividend policy. The company has after-tax earnings of $3,100 for the year and needs $3,000 for new investments. What is the total amount Jaguar will pay out in dividends for th..
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AK, Inc., has no debt outstanding and a total market value of $150,000. Earnings before interest and taxes, EBIT, are projected to be $36,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 15 percent..
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