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 initial margin deposit.
A) $10,000
B) $10,360.50
C) $10,318.75
D) $10,230.63
E) $10,429.35

Question

Quizplus · Accepted Answer

To calculate the initial margin deposit, we need to multiply the face value of the futures contract ($100,000) by the initial margin requirement (10%).

$100,000 x 0.10 = $10,000

However, we also need to convert the quoted price from dollars and cents to a decimal.

103:06 = 103 + 6/32 = 103.1875

So the total initial margin deposit is:

$100,000 x 0.10 x 103.1875 = $10,318.75

Therefore, the best choice is C.