Your Broker Requires an Initial Margin of $6,075 Per Futures

question 29

Multiple Choice

Your broker requires an initial margin of $6,075 per futures contract on wheat and a maintenance margin of $4,500 per contract.Wheat futures contracts are based on 5,000 bushels and quoted in cents per bushel.You sold one wheat futures contract yesterday at the closing settlement price quote of 786.Today,the settlement quote is 808.Will you receive a margin call and if so,for what amount? All margin calls restore the margin level to its initial level.

• A)no margin call
• B)call for $475
• C)call for $1,100
• D)call for $4,750
• E)call for $11,000

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Definitions:

Classical System

The classical system in economics refers to a school of thought that emphasizes free markets, competition, and the self-regulating nature of economies.

Self-Regulating Markets

A concept where markets operate and correct themselves through the forces of supply and demand without external intervention.

Flexible Wages

A wage system where pay rates can easily adjust in response to changing economic conditions, such as supply and demand for labor.

Aggregate Demand

The total demand for all goods and services within a country's economy at a given overall price level and in a given time period.