The Futures Price of Gold Is $1,000

question 24

Essay

The futures price of gold is $1,000. Futures contracts are for 100 ounces of gold, and the margin requirement is $3,000 a contract. The maintenance market requirement is $1,500. A speculator expects the price of gold to rise and enters into a contract to buy gold.
a. How much must the speculator initially remit?
b. If the futures price of gold rises to $1,005, what is the profit and return on the position?
c. If the futures price of gold declines to $998, what is the loss on the position?
d. If the futures price declines to $984, what must the speculator do?
e. If the futures price continues to decline to $982, how much does the speculator have in the account?

---

Definitions:

Nominal Group Technique

A structured method for group brainstorming that encourages contributions from everyone in the group and is used to generate and prioritize ideas.

Brainstorming

A group creativity technique designed to generate a large number of ideas for the solution of a problem.

Evaluation Apprehension

The anxiety or concern individuals may feel when they know they are being assessed or judged by others, which can impact performance.

Production Blocking

A hindrance in group ideation processes where an individual's contribution is limited or delayed due to the need to take turns.