Will Purchased 3 Futures Contracts on Corn

question 53

Multiple Choice

Will purchased 3 futures contracts on corn.The contract size is 5,000 bushels and the price is quoted in cents per bushel.Assume the initial margin requirement is 4.5 percent of the contract value.What is the amount of the initial margin if the futures quote is 624?

• A) $140.40
• B) $421.20
• C) $1,404
• D) $2,808
• E) $4,212

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Definitions:

Equilibrium Level

Refers to the state in a market where supply equals demand, leading to a stable price for a product or service.

Substitute Good

A product or service that can be used in place of another to satisfy similar needs or desires.

Equilibrium Price

The price at which the quantity of a product offered by sellers equals the quantity of the product that buyers are willing to purchase, without any surplus or shortage in the market.

Equilibrium Quantity

The amount of products or services that are both provided and sought after at the balance price, where the supply meets the demand.