Suppose you agree to purchase one ounce of gold for $984 any time over the next month. The current price of gold is $970. The spot price of gold then falls to $960 the next day. If the agreement is represented by a futures contract marking to market on a daily basis as the price changes,what is your cash flow at the end of the next business day?
A) $10
B) $5
C) $0
D) -$5
E) -$10

Question

Quizplus · Accepted Answer

The futures contract is marked to market daily. Since the price fell from $970 to $960, you incur a loss of $10 per ounce, resulting in a cash outflow of $10.

Suppose You Agree to Purchase One Ounce of Gold for $984