You purchased five August 13 futures contracts on soybeans at a price quote of 1056′6. Each contract is for 5,000 bushels with the price quoted in cents and 1/8ths of a cent per bushel. Assume the contract price is 1061′4 when you close out your contract six weeks from now. What will be your total profit or loss on this investment?
A)$950.25
B)$1,187.50
C)$6,480.75
D)$16,200.50
E)$24,000.00

Question

Quizplus · Accepted Answer

The profit or loss on a futures contract is calculated by the difference in the buy and sell prices, multiplied by the contract size, and then multiplied by the number of contracts. The initial price is 1056′6 (or 1056.75 in decimal), and the closing price is 1061′4 (or 1061.50 in decimal). The difference is 4.75 cents per bushel. Each contract is for 5,000 bushels, so the profit per contract is 4.75 cents * 5,000 bushels = $237.50. Since there are five contracts, the total profit is $237.50 * 5 = $1,187.50.

You Purchased Five August 13 Futures Contracts on Soybeans at a Price