The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat.
a. How much must the speculator initially remit?
b. If the futures price rises to $2.60, what is the profit and return on the position?
c. If the futures price declines to $2.47, what is the loss on the position?
d. If the futures price rises to $2.70, what must the speculator do?
e. If the futures price continues to decline to $2.32, how much does the speculator have in the account?

Question

The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat. 
a. How much must the speculator initially remit? 
b. If the futures price rises to $2.60, what is the profit and return on the position? 
c. If the futures price declines to $2.47, what is the loss on the position? 
d. If the futures price rises to $2.70, what must the speculator do? 
e. If the futures price continues to decline to $2.32, how much does the speculator have in the account?

Quizplus · Accepted Answer

The Answer of The futures price of a commodity such as wheat is $2.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. The maintenance market requirement is $1,000. A speculator expects the price of the commodity to rise and enters into a contract to buy wheat. 
a. How much must the speculator initially remit? 
b. If the futures price rises to $2.60, what is the profit and return on the position? 
c. If the futures price declines to $2.47, what is the loss on the position? 
d. If the futures price rises to $2.70, what must the speculator do? 
e. If the futures price continues to decline to $2.32, how much does the speculator have in the account?

The Futures Price of a Commodity Such as Wheat Is