Question

Suppose you are holding a long position in a euro futures contract that matures in 76 days. The agreed upon price is $1.15 for 125,000 euro. At the close of trading today, the futures price has risen to $1.165. Under marking to market, you now __________.a. hold a futures contract that has risne in value by $1,250 b. must pay $1,250 to the seller of the futures contract c. hold a futures contract that has fallen in value by $625 d. will receive $625 into your account with a new futues contract priced at $1.155

Answer 1

Answer: Please refer to Explanation,

Step-by-step explanation:

A Long Position signifies that you are the buyer, this means that you will get to profit from daily gains. This is because this is a Futures Contract and Futures contract get settled daily for any increases or decreases in the Futures price.

The agreed upon price was $1.15 but the price has gone up to $1.165 meaning that it has gained,

= 1.165 - 1.15

= $0.015

Multiplying this by the amount Euro to be exchanged,

= 0.015 * 125,000

= $1,875

The solution should be that you will receive $1,875 into your account with a new futues contract priced at $1.165.

I do not see that option so there is either a problem with the solutions or with the question. Check again to see if all the details are correct.

Going by Option D, check if the new Futures price was $1.155 not $1.165.