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A company enters a futures contract to sell 50,000 units of a commodity for 70 cents per unit. The initial margin is $4,000 and the maintenance margin is $3,000. What change in the futures price (per unit) would lead to a margin call?

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ogorwyne

Answer:

72 cents

Explanation:

There is going to be a margin call when greater than 1000 dollars has been lost from the margin. Then the balance in the account is going to be smaller than that of the maintenance margin. so 1 cent increase in the price would bring about a lossof

0.01 * 50000

= $500

if the increase in the future price is about 2 cents then there would be a margin call.

70+2 = 72cents, this is when there would be a margin call

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