You Purchased Two Futures Contracts on Soybeans at a Price

question 97

Multiple Choice

You purchased two futures contracts on soybeans at a price quote of 1344'0. The initial margin requirement is $4,750 per contract and the maintenance margin is $3,500 per contract. The contract quantity is 5,000 bushels and the price quote is in cents per bushel. What is the lowest the price quote can go before you receive a margin call?

• A) 1314'0
• B) 1315'0
• C) 1319'0
• D) 1322'0
• E) 1325'0

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Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all direct and indirect manufacturing costs in the cost of a product.

Net Operating Income

A financial metric that calculates a company's income after operating expenses are deducted, but before interest and taxes.

Absorption Costing

A method of inventory costing in which all costs of production (both fixed and variable) are treated as product costs.

Gross Margin

Gross margin is the difference between revenue and the cost of goods sold, divided by revenue, expressed as a percentage. It measures how much a company earns taking into consideration the costs that it incurs for producing its products or services.