Answer to Question #170680 in Economics for tamirat

Question

Suppose that Mr, Binda buys a three-month 5,000 contract to buy "commodity-X' at a futures price of 1,0000 from Mr. John. The contract requires an initial margin of $70 per contract and maintenance margin of $40 per contract. Required a)   Compute the initial margin that both Mr. Binda must deposit to the clearing house. b)   Compute the maintenance margin that both Mr. Binda must deposit to the clearing house.

Answer 1

a)

$$70\times3 \times30=6300$$

b)

$$40\times30\times3=3600$$