Assume the initial margin on a Swiss franc futures contract is $2,000. If an individual purchases a contract at $0.78 per franc and the contract involves 125,000 Swiss francs, what return on invested capital will the investor receive if the price per franc moves to $0.80?

Question

Quizplus · Accepted Answer

The profit per franc is $0.02 ($0.80 - $0.78). For 125,000 francs, the total profit is $2,500 (125,000 * $0.02). The return on invested capital is the profit divided by the initial margin: $2,500 / $2,000 = 1.25 or 125%.

Assume the Initial Margin on a Swiss Franc Futures Contract