High School

An investor has just entered 2 short palladium futures contracts at a futures price of $1,886 per troy ounce. The size of each contract is 100 troy ounces. The initial margin is $20,000 per contract and the maintenance margin is $15,000 per contract. A month after opening the position the futures price rises to $1,913 per barrel. What is the balance of the total margin account at the end of the month? (Assume that no margin call has occurred over this period and your answer should be to the nearest dollar, without the dollar sign.)

Answer :

An investor has just entered 2 short palladium futures contracts at a futures price of $1,886 per troy ounce. The size of each contract is 100 troy ounces. Therefore, the answer is $331,800.

The initial margin is $20,000 per contract and the maintenance margin is $15,000 per contract. A month after opening the position the futures price rises to $1,913 per troy ounce. What is the balance of the total margin account at the end of the month? (Assume that no margin call has occurred over this period and your answer should be to the nearest dollar, without the dollar sign.)

When an investor enters 2 short palladium futures contracts at a futures price of $1,886 per troy ounce, the amount the investor received is `2*100*1886 = 377,200`.

For two futures contracts, the initial margin is $20,000 per contract and the total initial margin is $20,000 x 2 = $40,000.

The futures price then rose to $1,913 per troy ounce, for a loss of $27 per troy ounce and $2,700 per contract. The total loss is $2,700 x 2 = $5,400.

The balance of the total margin account at the end of the month is:377,200 - 5,400 - 40,000 = $331,800 (to the nearest dollar, without the dollar sign).

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