Your Broker Requires an Initial Margin of $1,500 and a Maintenance

question 77

Multiple Choice

Your broker requires an initial margin of $1,500 and a maintenance margin of $1,000 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 113′245 yesterday. Today, the settlement quote is 112′265. Your margin balance at yesterday's close was $1,150. 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 $1,037.50
• C)call for $937.50
• D)call for $1,100
• E)call for $1,287.50

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Definitions:

Gain

A financial increase resulting from a transaction that exceeds the costs or purchase prices of the assets sold, not related to the primary operations.

Long-Term

Refers to holding or affecting a period extending over a long duration, typically beyond one year.

Investments

Financial assets acquired for income generation or capital appreciation.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible to a known amount of cash and close to their maturity.