Your Broker Requires an Initial Margin of $4,725 Per Futures

question 33

Multiple Choice

Your broker requires an initial margin of $4,725 per futures contract on soybeans and a maintenance margin of $3,500 per contract. Soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel. Yesterday, you bought 4 soybean futures contracts at the closing settlement price of 1372. Today, the settlement quote is 1340. All margin calls restore margin levels to their initial margin level. Will you receive a margin call and if so, for what amount?

• A) no margin call
• B) call for $425
• C) call for $487
• D) call for $1,650
• E) call for $6,400

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Definitions:

Return

The income generated from an investment, often expressed as a percentage of the invested capital.

Invest

The activity of managing financial assets with the aim of yielding income or financial gains.

Semiannual Payments

Payments made twice a year, often used in the context of bond interest payments or loans.

Annual Rate

The interest rate for a period of one year, not considering compounding.