Yesterday,you entered into a futures contract to buy €62,500 at $1.50 per €.Your initial performance bond is $1,500 and your maintenance level is $500.At what settle price will you get a demand for additional funds to be posted?
A)$1.5160 per €.
B)$1.208 per €.
C)$1.1920 per €.
D)$1.4840 per €.

Question

Quizplus · Accepted Answer

The initial performance bond is $1,500, and the maintenance level is $500. This means you need to maintain at least $500 in your account. The contract size is €62,500. If the price moves against you from $1.50 to $1.4840 per €, the loss is ($1.50 - $1.4840) * €62,500 = $1,000. This reduces your performance bond from $1,500 to $500, which is the maintenance level. Any further drop in price would trigger a demand for additional funds.

Yesterday,you Entered into a Futures Contract to Buy €62,500 at $1.50