On Monday morning you sell one June T-bond futures contract at 97: 27 or for $97 843.75. The contract's face value is $100 000. The initial margin requirement is $2 700 and the maintenance margin requirement is $2 000 per contract. Use the following price data to answer the question. At the close of day Tuesday your cumulative rate of return on your investment is

Question

On Monday morning you sell one June T-bond futures contract at 97: 27 or for $97 843.75. The contract's face value is $100 000. The initial margin requirement is $2 700 and the maintenance margin requirement is $2 000 per contract. Use the following price data to answer the question.  At the close of day Tuesday your cumulative rate of return on your investment is

Quizplus · Accepted Answer

To calculate the cumulative rate of return, we need to calculate the profit or loss made on the futures contract.

On Tuesday, the settlement price for the T-bond futures contract is 97:16. This means that the price of the contract has decreased from its initial value of 97:27.

To calculate the profit or loss, we need to determine the difference between the initial price and the settlement price:

$97,843.75 - $97,500 = $343.75

This means that you have made a loss of $343.75 on the futures contract.

To calculate the rate of return, we need to divide the profit or loss by the initial margin requirement:

$343.75 / $2,700 = -0.1273 or -12.73%

Therefore, the cumulative rate of return on the investment is:

-12.73% + 6.9% = -5.83%

So, the correct answer is B.

On Monday Morning You Sell One June T-Bond Futures Contract