Question

Today's settlement price on a Chicago Mercantile Exchange (CME) yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7985/¥100. (The contractual size of one CME yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be:

A) $1,425.
B) $2,000.
C) $2,325.
D) $3,425.

Answer 1

C) $2,325.

Step-by-step explanation:

The computation of the balance of the margin account after the third day is given below:

Day Opening Balance Change in margin Closing balance

1 $2,000 [($0.8011 - $0.8057) ÷ Yen 100 ] × Yen 12,500,000 = (-)$575 $ 1,425

2 $1425 [($0.8057 - $0.7996) ÷ Yen 100 ] × Yen 12,500,000 = $762.50 $2,187.50

3 $2187.50 [($0.7996 - $0.7985) ÷ Yen 100 ] × Yen 12,500,000 = $137.50 $2,325

We simply applied the above formula and the computation is shown above