USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A futures contract on Treasury bond futures with a December expiration date currently trade at 103:06. The face value of a Treasury bond futures contract is $100,000. Your broker requires an initial margin of 10 percent.
-Refer to Exhibit 15.8. Calculate the current value of one contract.
A) $100,000
B) $103,600.5
C) $103,187.5
D) $102,306.3
E) $104,293.5

Question

Quizplus · Accepted Answer

To calculate the current value of one contract, we need to multiply the futures price by the face value of the contract:

103:06 x $1,000 = $103,062.50

However, since the face value of a Treasury bond futures contract is $100,000, we need to adjust the answer by multiplying it by the contract size:

$103,062.50 x 100,000 = $10,306,250

Then, to calculate the amount of initial margin required by the broker, we need to multiply the current value of one contract by the initial margin requirement (10%):

$10,306,250 x 0.1 = $1,030,625

Therefore, the correct answer is C) $103,187.5