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kow
2 months ago
12

Suppose that you enter into a short futures contract to sell July silver for $17.20 per ounce. The size of the contract is 5,000

ounces. The initial margin is $4,000, and the maintenance margin is $3,000. What change in the futures price will lead to a margin call? What happens if you do not meet the margin call?
Business
1 answer:
Mariulka [3.8K]2 months ago
7 0
$0.20 Explanation: To determine the adjustment in the future price, the initial step is calculating the loss, as follows: Loss = Initial Margin - Maintenance Margin = $4,000 - $3,000 = $1,000. The future price adjustment will then be Loss divided by the size of the contract, returning to $1,000 ÷ 5,000 ounces = $0.20. Thus, the future price rises by $0.20. If the margin call isn't satisfied, the broker will step in at the maximum price to prevent additional losses.
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