1. A firm enters into a long position in 10 silver futures contracts at a futures price of $4.52/oz., and closes out the position at a price of $4.46/oz. If one silver futures contract is for 5,000 ounces, what are the investor’s gains or losses?
2. A firm enters into a short futures position in 10 contracts in gold at a futures price of $276.50 per oz. The size of one futures contract is 100 oz. The initial margin per contract is $1,500, and the maintenance margin is $1,100.
(a) What is the initial size of the margin account?
(b) Suppose the futures settlement price on the first day is $278.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
(c) The futures settlement price on the second day is $281.00 per oz. What is the new balance in the margin account? Does a margin call occur? If so, assume that the account is topped back to its original level.
(d) On the third day, the investor closes out the short position at a futures price of $276.00. What is the final balance in his margin account?
(e) Ignoring interest costs, what are his total gains or losses?
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