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:

Initial Yield

The initial yield is a financial measure indicating the first year's return on an investment in real estate or bonds, often expressed as a percentage of the investment's cost.

Yield Sensitivity

The degree to which the price of a bond or other debt security responds to changes in interest rates, affecting investors' returns.

Price Volatility

Price Volatility describes the extent to which the price of an asset or security fluctuates over time, indicating the level of risk involved.

Maturity

Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.