A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound.If the initial margin is $2,525 and the maintenance margin is $1,000,at what price would there be a margin call?
A)31.91
B)32.11
C)31.29
D)31.09
E)31.80

Question

Quizplus · Accepted Answer

The correct answer is A because the margin call would occur when the futures price falls to $31.29, which is $0.31 below the initial margin of $2,525 divided by 5,000 pounds.

A Futures Contract Covers 5000 Pounds with a Minimum Price