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total value of the futures contract

16) You purchased the following futures contract today at the settlement price listed in the Wall Street Journal. Answer the questions below regarding the contract.

Soybean Oil (CBT) 60,000 lbs.; cents per lb.
Lifetime
Open High Low Settle Change High Low Open Interest
Oct. 15.28 15.33 15.25 15.29 -.02 20.35 15.25 7,441

(a) What is the total value of the futures contract?
(b) If there is a 10% margin requirement how much do you have to deposit?
(c) Suppose the price of the futures contract changes as shown in the following table. Enter the relevant information into the table. Show your calculations.
(d) Explain why the account is marked-to-market daily.

Day Futures Price Profit/Loss per lb. Total Value of Contract Mark-to-Market Settlement
0 $0.1529 n.a. n.a.
1 $0.1527
2 $0.1540
3 $0.1597

Solution Preview

Please see attached file.

(a) What is the total value of the futures contract?
The dollar value of a futures contract is simply the contract size multiplied by the settlement price.
Thus, value = 60,000 * 15.29% = $9,174

(b) If there is a 10% margin requirement how much do you have to deposit?
Margin requirement is the minimum amount that a client must deposit in the form of ...

Solution Summary

The total value of the futures contract is determined.

$2.19