Your Broker Requires an Initial Margin of $2,500 and a Maintenance

question 52

Multiple Choice

Your broker requires an initial margin of $2,500 and a maintenance margin of $1,500 on Treasury note futures. Treasury note futures contracts are based on a $100,000 par value and quoted in points and one-half of 1/32 of a point. You own one Treasury futures contract that had a closing settlement quote of 112′165 yesterday. Today, the settlement quote is 111′105. Your margin balance at yesterday's close was $2,100. All margin calls restore margin levels to their initial level. Will you receive a margin call based on today's settlement quote and, if so, for what amount?

• A)no margin call
• B)call for $1,100.50
• C)call for $1,287.50
• D)call for $1,587.50
• E)call for $1,775.00

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Definitions:

Level of Operations

Refers to the scale of production or business activity, indicating the degree to which a company utilizes its resources.

Factoring

Factoring is a financial transaction where a business sells its accounts receivable to a third party (the factor) at a discount, to raise immediate capital.

Accounts Receivable

Money owed to a company by its customers for products or services delivered but not yet paid for.

Without Recourse

A term indicating that the seller of an asset is not responsible for the buyer's losses if the asset fails to perform as expected.