Require the investor to deposit funds in margin account

Assignment Help Financial Management

Reference no: EM131062857

Let’s consider an investor who contacts his or her broker on Friday, December 5, to buy three December gold futures contract on the COMEX division of NYME. Suppose the current future price is $1000 per ounce. Since the contract size is 100 ounces, the investor has contracted to buy a total of 300 ounces at this price. Now, the broker will require the investor to deposit funds in a “margin account”. Initial margin was $1,500 per contract. At the end of each trading day, the margin account is adjusted to reflect investor’s gain or loss (Marking to market). Assume maintenance margin is $1,100 per contract. Based on the account history below, when would an investor receive a margin call and how much is he required to deposit to his account?

Reference no: EM131062857

Questions Cloud

The variances and standard deviations for cherry and straw : The rate of return on Cherry Jalopies, Inc., stock over the last five years was 16 percent, 11 percent, -1 percent, 6 percent, and 11 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 23 percent, -6 perce..

State of economy probability of state of economy return : Security Returns If State Occurs State of Economy Probability of State of Economy Roll Ross Bust .20 –18 % 21 % Boom .80 18 6 Calculate the standard deviations for Roll and Ross by filling in the following table. State of Economy Probability of State..

Government requirements imposed on public corporation : What are some of the government requirements imposed on a public corporation that are not imposed on a private, closely held corporation? Discuss pros and cons of each.

Make calculations in cost estimates has advantage : Using BY$ to make calculations in cost estimates has the advantage that ______

Require the investor to deposit funds in margin account : Let’s consider an investor who contacts his or her broker on Friday, December 5, to buy three December gold futures contract on the COMEX division of NYME. Suppose the current future price is $1000 per ounce. Now, the broker will require the investor..

What are the appropriate allocation rate : St. Luke's hospital has three support departments and four patient services departments. What are the appropriate allocation rates? Use an allocation table similar to Exhibit 6.7 to allloate the hospital's overhead costs to the patient services depar..

What is profitability index-payback period of the project : Conch Republic Electronics is a midsized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other ..

Calculate the standard deviation of returns : Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. Assuming that all three states are equally likely. (Do not round intermediate calculations.

Calculate the arithmetic return and geometric return : You are given the returns for the following three stocks: Year Stock A Stock B Stock C 1 14 % 14 % −19 % 2 14 14 34 3 14 22 37 4 14 7 14 5 14 13 4 Calculate the arithmetic return, geometric return, and standard deviation for each stock.

User Account

All Pages