Use the table for the question(s)below.

-Suppose oil futures prices are as given in the above table (price per barrel).Suppose you buy 100 crude oil futures contracts,each for 1000 barrels of crude oil,at the current futures price of $108 per barrel on day 0.What is your cumulative profit/loss in your margin account by the end of day 5?
A)-$300,000
B)$300,000
C)$400,000
D)-$400,000
E)$0

Question

Use the table for the question(s)below.
 
-Suppose oil futures prices are as given in the above table (price per barrel).Suppose you buy 100 crude oil futures contracts,each for 1000 barrels of crude oil,at the current futures price of $108 per barrel on day 0.What is your cumulative profit/loss in your margin account by the end of day 5?
A)-$300,000 
B)$300,000 
C)$400,000 
D)-$400,000 
E)$0

Quizplus · Accepted Answer

To calculate the cumulative profit/loss in the margin account, we need to determine the settlement price on day 5 and compare it to the initial futures price of $108 per barrel.

On day 5, the settlement price is $104 per barrel, which results in a loss of $4 per barrel. For 100 contracts with 1000 barrels each, the total loss is:

100 x 1000 x $4 = $400,000

Since the loss is negative, the answer is option D, -$400,000.

Use the Table for the Question(s)below