On March 1,you contract to take delivery of 1 ounce of gold for £415.The agreement is good for any day up to April 1.Throughout March,the price of gold hit a low of £385 and hit a high of £435.The price settled on March 31 at £420,and on April 1st you settle your futures agreement at that price.Your net cash flow is:

Question

Quizplus · Accepted Answer

The contract was for 1 ounce of gold at £415. The settlement price was £420. Therefore, you made a profit of £5 per ounce. Your net cash flow would be the profit minus the initial cost, which is £5 - £415 = £-410. However, keep in mind that you made a profit, so the answer would be a positive value. Therefore, the correct answer is £5.

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