On March 1,you contract to take delivery of 1 ounce of gold for $495. The agreement is good for any day up to April 1. Throughout March,the price of gold hit a low of $425 and hit a high of $535. The price settled on March 31 at $505,and on April 1^st you settle your futures agreement at that price. Your net cash flow is: A) -$30. B) -$20. C) -$15. D) $10. E) $20.

Question

Quizplus · Accepted Answer

The price of gold on March 1 was $495, and you agreed to buy 1 ounce of gold for that price. The price of gold fluctuated throughout March, but it settled at $505 on March 31. You settled your futures agreement on April 1st at that price, so you paid $505 for the gold. You originally agreed to pay $495 for the gold, so your net cash flow is $505 - $495 = $10.

On March 1,you Contract to Take Delivery of 1 Ounce