Use this information to answer the questions 3-4.
You purchase a futures contract for September delivery September 15 th of 62,500 pounds on March 15 th . The pound futures exchange rate is $1.65 per pound. The bank has a margin requirement of 2 percent.
-When the futures contract matures in September the spot rate is $1.67 per pound.How much will you have to pay when the futures contract matures?
A) $103,125
B) $104,375
C) $105,187.5
D) $106,462.5

Question

Quizplus · Accepted Answer

The correct answer is A because the futures contract is for 62,500 pounds, and the spot rate at maturity is $1.67 per pound. Therefore, the total value of the contract at maturity is 62,500 * $1.67 = $104,375. The margin requirement is 2%, so the amount that must be paid when the contract matures is $104,375 * 0.02 = $2,087.50. Therefore, the total amount that must be paid is $104,375 + $2,087.50 = $106,462.50.

Use This Information to Answer the Questions 3-4