2010_Fall_001-2nd_exam

2010_Fall_001-2nd_exam - International Finance Fin435.001...

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Unformatted text preview: International Finance Fin435.001 Fall 2010 Exam #2 Prof. M. Rhee 1. You took a short position in three contracts of Euro futures (125,000 Euros for one contract) at 10am CST on 11/9 for 2010 December delivery at $0.923/€. What is the initial margin amount at a 2% initial margin requirement? Given that you put down $200 more than the 2% initial margin requirement, what is the ending balance of your account at the end of 11/9 if the settlement price of 11/9 is $0.927/€? What is your new margin ratio at the end of the day of 11/9? Do you get a margin call, if the minimum maintenance margin is1.5%? If so, how much is the variation margin? Assuming that you are going to add $300 more than the variation margin, if you get the margin call, what would be the ending balance of 11/9? If the futures rate increases to $0.929/€ on 11/10, do you get a margin call? What is the variation margin? What will be the ending balance if you add $300 more than the variation margin? Euro Future s P osition Short # Contracts 3 Contract Size 125,000 € 11/9 10 am CST 0.923 $ 11/9 Settlement 0.927 $ 11/10 Settlement 0.929 $ Initial M argin Requirement 2% A dditional D eposit for M argin C 300 $ Contract V alue at 10 am CST on 346,125 $ ( = 3 × €125,000 × $0.923/€) (1) Initial M argin Required Initial M argin Required = 3 × €125,000 × $0.923/€ × 0.02 6,922.50 $ (2) Ending Balance of A ccount at the End of 11/9 & M argin Ratio- Ending Balance on 11/9 = $6,922.50 +$200 + {$(0.923 - 0.927)/€ × 3 × €125,000} = 5,622.50 $ - M argin Ratio = $5,622.50 / ($0.927/€ × 3 × €125,000) = 1.6174% ⇨ D o not get a margin call because the margin ratio is greater than the minimum maintanance margin ratio of 1.5% ⇨ N o variation margin is needed. Therefore, the ending balance of your margin account on 11/9 is $5,622.50 (3) M argin Call on 11/10? V ariation M argin? Ending Balance w ith A dditional $300?(3) M argin Call on 11/10?...
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This note was uploaded on 02/16/2012 for the course BUSINESS 331 taught by Professor Rhee during the Spring '12 term at Strayer.

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2010_Fall_001-2nd_exam - International Finance Fin435.001...

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