2010_Fall_101-2nd_exam

# 2010_Fall_101-2nd_exam - International Finance Fin435.101...

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International Finance Fin435.101 Fall 2010 Exam #2 Prof. M. Rhee 1. You took a long 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 requirement at a 2% initial margin? 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 \$0.917/€? 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 becomes \$0.909/€ 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? Position Long # Contracts 3 Contract Size 125,000 11/9 10 am CST 0.923 \$ 11/9 Settlement 0.917 \$ 11/10 Settlement 0.909 \$ Initial Margin Requirement 2% Additional Deposit for Margin Call 300 \$ Contract Value at 10 am CST on 11/9 346,125 \$ ( = 3 × €125,000 × \$0.923/€) (1) Initial Margin Required Initial Margin Required = 3 × €125,000 × \$0.923/€ × 0.02 = 6,922.50 \$ (2) Settlement Balance of Account at the End of 11/9, Margin Ratio, Margin Call, Variation Margin, & Ending Balance - Settlement Balance on 11/9 = \$6,922.50 +\$200 + {\$(0.917 - 0.923)/€ × 3 × €125,000} = 4,872.50 \$ - Margin Ratio = \$4,872.50 / (\$0.917/€ × 3 × €125,000) = 1.4169% You get a margin call because the margin ratio is less than the minimum maintanance margin ratio of 1.5% - Variation Margin = (\$0.917/€ × 3 × €125,000 × 0.02) - \$4,872,50 =

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2010_Fall_101-2nd_exam - International Finance Fin435.101...

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