Investments.

May 31st, 2016
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1. The futures price of corn is $2.00. The contracts are for 10,000 bushels, so a contract is worth $20,000. The margin requirement is $2,000 a contract, and the maintenance margin requirement is $1,200. A speculator expects the price of the corn to fall and enters into a contract to sell corn. a. How much must the speculator initially remit?

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Investments1JKInstructor Charles BensonInvestmentsJanuary 3, 2016InvestmentsInvestments21. The futures price of corn is $2.00. The contracts are for 10,000 bushels, so a contract isworth $20,000. The margin requirement is $2,000 a contract, and the maintenance marginrequirement is $1,200. A speculator expects the price of the corn to fall and enters into acontract to sell corn.a. How much must the speculator initially remit?The investor must remit the margin requirement: $2,000.b. If the futures price rises to $2.13, what must the speculator do?The contract is currently worth $2.13 x 10,000 = $21,300. The speculator has lost $1,300 and has$700 margin remaining. This amount is less than the $1,200 maintenance margin requirement, sothe speculator will have to remit $1,300 to restore the original $2,000.c. If the futures price continues to rise to $2.14, how much does the speculator have in theaccount?If the price continues to increase to $2.14, the speculator losses an additional $100 ($0.01 x10,000). The margin account now has $1,900 remaining.2.)a) The margin requirement of the contract is $5,000, so the speculator must remit the amount thatis equal to the margin requirement of $5,000.b) If the futures price of gold rises to $1,055, what is the profit and percentage return on yourposition? The speculator would receive $500 and may withdrawal $500 from the account sincethe account exceeds the initial margin requirement. The percentage return w

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