Today's settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME Yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be

Question

Quizplus · Accepted Answer

To calculate the P&L for each day, we use the following formula:

P&L = (Settlement price - Previous day's settlement price) x Contract size

Day 1 P&L = ($0.8057/¥100 - $0.8011/¥100) x ¥12,500,000 = ¥56,250

Day 2 P&L = ($0.7996/¥100 - $0.8057/¥100) x ¥12,500,000 = -¥75,000

Day 3 P&L = ($0.7985/¥100 - $0.7996/¥100) x ¥12,500,000 = -¥13,750

Since the contract is short, the P&L will be subtracted from the margin account balance.

Day 1 margin account balance = $2,000 - ¥56,250 / 100 = $1,437.50

Day 2 margin account balance = $1,437.50 - (-¥75,000) / 100 = $2,187.50

Day 3 margin account balance = $2,187.50 - (-¥13,750) / 100 = $2,325

Therefore, the balance of the margin account after the third day will be $2,325, which corresponds to choice C.

Today's Settlement Price on a Chicago Mercantile Exchange (CME) Yen