An Investor Enters into a Long Position in 10,000 Futures

question 37

Multiple Choice

An investor enters into a long position in 10,000 futures contracts of oil with a $50,000 initial margin and has a maintenance margin that is 75% of this amount.The futures price associated with this contract is $100.Assuming the price of the underlying asset decreases to $98, what is the margin call?

• A)$50,000
• B)$37,500
• C)$7,500
• D)No margin required

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Definitions:

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.

Indirect Expenses

Costs not directly attributable to the production of a specific product or service, such as administrative salaries and utilities.

Expense Allocation

Expense allocation is the process of distributing expenses across various departments, projects, or products to accurately reflect where the costs were incurred.

Direct Expenses

Costs that can be directly attributed to the production of specific goods or services, such as raw materials and labor directly involved in manufacturing.