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:

Long-term Debt

Debt obligations with a maturity of more than one year, utilized to finance a company's operations or expansions over a longer period.

Capital Lease

A lease arrangement that transfers substantially all the risks and rewards of ownership of an asset to the lessee, essentially treated as a purchase.

Retained Earnings

The portion of net earnings not paid out as dividends but instead reinvested in the company or used to pay off debt.

Deferred Income Taxes

Taxes applicable on income that is recognized in financial statements in one period but is taxable in another period.