Given a 5,000 Bushel Futures Contract on Grain at a Price

question 78

Essay

Given a 5,000 bushel futures contract on grain at a price of $2.75 per bushel,margin requirement is 5 percent,maintenance margin is 80 percent.What would the return on investment be if the price increases by $.08 per bushel?

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Definitions:

Lot-For-Lot

A purchasing and inventory management strategy where exactly the amount needed for production or demand is ordered, minimizing inventory holding costs.

Part Period Balance

A method used in inventory management to determine the optimal order quantity by balancing the costs across multiple periods.

EOQ Lot Sizing

A formula designed to determine the optimal order quantity that minimizes the total cost of inventory, including holding and ordering costs.

Setup Cost

The expenses incurred to prepare equipment, machinery, or processes for manufacturing a new product batch, including the adjustment of tools and configuration changes.