Your broker requires an initial margin of $4,725 per futures contract on soybeans and a maintenance margin of $3,500 per contract. Soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel. Yesterday, you bought 4 soybean futures contracts at the closing settlement price of 1372. Today, the settlement quote is 1340. All margin calls restore margin levels to their initial margin level. Will you receive a margin call and if so, for what amount?
A) no margin call
B) call for $425
C) call for $487
D) call for $1,650
E) call for $6,400

Question

Quizplus · Accepted Answer

The price dropped by 32 cents per bushel (1372 - 1340). For 4 contracts, the loss is 32 cents * 5,000 bushels/contract * 4 contracts = $6,400. This loss reduces the margin below the maintenance level, triggering a margin call to restore it to the initial margin.

Your Broker Requires an Initial Margin of $4,725 Per Futures