Suppose you decided to enter into a futures contract involving a stock that sells for Php888.75 per share and you purchased 1,000 shares of this stock. The initial margin requirement is 25% of the price and the maintenance margin requirement per contract is 20% of the stock price. Assume that you went 5 long contracts. (Show complete solution for each item.) A. How much would you have to pay in initial margin? B. How much is the maintenance margin requirement value? C. What is the price of the stock when maintenance margin will be hit? Interpret the result.
Suppose you decided to enter into a futures contract involving a stock that sells for Php888.75 per share and you purchased 1,000 shares of this stock. The initial margin requirement is 25% of the price and the maintenance margin requirement per contract is 20% of the stock price. Assume that you went 5 long contracts. (Show complete solution for each item.) A. How much would you have to pay in initial margin? B. How much is the maintenance margin requirement value? C. What is the price of the stock when maintenance margin will be hit? Interpret the result.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Suppose you decided to enter into a futures contract involving a stock that sells for Php888.75 per share and you purchased 1,000 shares of this stock. The initial margin requirement is 25% of the price and the maintenance margin requirement per contract is 20% of the stock price. Assume that you went 5 long contracts. (Show complete solution for each item.)
A. How much would you have to pay in initial margin?
B. How much is the maintenance margin requirement value?
C. What is the price of the stock when maintenance margin will be hit? Interpret
the result.
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