Let's Consider a Swiss Franc Futures Contract Traded in the United

question 13

Essay

Let's consider a Swiss franc futures contract traded in the United States. On February 18 (a Friday), the March contract closed at 0.7049 dollar per Swiss franc. The size of the contract is 125,000 Swiss francs. The initial margin is $2,600 per contract and the maintenance margin is $1,600. Assume that you buy one March contract on February 19 at 0.7049 $/SFr and you deposit, in cash, an initial margin of $2,600. Listed below are the futures quotations (settlement prices) observed on three successive days:
$\begin{array}{lccl}\hline \text { Feb. 18 } & \text { Feb. 20 } & \text { Feb. 21 } & \text { Feb. 22 } \\\hline 0.7049 & 0.7009 & 0.6949 & 0.7089\\\hline\end{array}$
What are the cash flows associated with the marking-to-market procedure?

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Definitions:

Nonmanufacturing Costs

Nonmanufacturing costs are expenses not directly related to the production of goods, including selling, general, and administrative expenses.

Selling

The process of persuading someone to buy a product or service, a fundamental activity in business.

Administrative

Pertaining to activities related to the management and general operations of an organization, often involving tasks like paperwork, communication, and office upkeep.

Job Order Costing System

An accounting method used to track the production costs (materials, labor, and overhead) for specific jobs or batches of product.