HW 3 Solutions

# HW 3 Solutions - Suggested Solution to HW 3 Problem 7.1(See...

This preview shows pages 1–2. Sign up to view the full content.

Suggested Solution to HW 3 : Note that the short side of a futures contract gains (loses) from a declining (increasing) price of the underlying asset. Thus, \$1,700 + [(\$1.3140 - \$1.3126) + (\$1.3126 - \$1.3133) + (\$1.3133 - \$1.3049)] x EUR125,000 = \$2,837.50, where EUR125,000 is the contract size of one EUR contract. day settlement price Gain/Loss Account Balance 0 1.3140 0 1,700.00 1 1.3126 175 1,875.00 2 1.3133 -87.5 1,787.50 3 1.3049 1050 2,837.50 : Note that the long side of a futures contract gains (loses) from an increasing (declining) price of the underlying asset. Thus, Solution: \$1,700 + [(\$1.3126 - \$1.3140) + (\$1.3133 - \$1.3126) + (\$1.3049 - \$1.3133)] x EUR125,000 = \$562.50, where EUR125,000 is the contract size of one EUR contract. With only \$562.50 in your performance bond account, you would experience a margin call requesting that additional funds be added to your performance bond account to bring the balance

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

HW 3 Solutions - Suggested Solution to HW 3 Problem 7.1(See...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online