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 $0.7997/¥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

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 $0.7997/¥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

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter5: Currency Derivatives

Section: Chapter Questions

Problem 3IEE

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On Monday morning, a trader takes a long position in Australian dollars (AUD) future currency contract that matures on Thursday afternoon. The agreed upon price is USD76691/AUD for a currency lot of AUD100,000. A trader needs AUD 175,000. At the close of trading on Monday, the futures price falls to USD0.76620 = 1 AUD. At Tuesday close, the price further falls down to USD0.76602 = 1 AUD. At Wednesday close, the price rises to USD0.76658 = 1 AUD. At Thursday close, the price further rises to USD0.76698 = 1 AUD and the contract matures. The trader takes delivery of the AUD at the prevailing price of USD0.76698 = 1 AUD. What will be the trader’s profit (loss)? Gain of USD 7 Gain of USD 70 Loss of USD 7 Loss of USD 70
Suppose that the spot EUR in dollar exchange rate is EUR/USD = 1.0510-15. A trader bought a futures contract with a contract size of EUR 125,000, an initial margin of USD 2,600 and a maintenance margin of USD 2,400 at USD 1.0525 three days ago and had no gains or losses on the purchase day. The amount within the margin account will be cleared if no positions are taken. The settlement prices were USD 1.0512 and USD 1.0508 for the previous two trading days, respectively. The settlement price today is USD 1.0520. What is the amount within the margin account if this trader decides not to put any money aside for this margin account after purchase?
A futures trader goes for long position on two (2) CME Australian dollar contracts for AUD100,000 per contract. He purchases the currency futures on day 1 at US$0.7850. The margin required to initiate the trading is 5 percent of the contract value, while the maintenance margin is 80% of the initial margin. The settlement prices are US$0.7877 on day 1 and US$0.7860 on day 2. The prices move to US$0.7800 and US$0.7890 on day 3 and day 4 respectively. Then, the trader has decided to close the position on day 4. Calculate the daily marked-to-market transactions and the changes in the margin account. Determine net profit from the futures trading.
Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (a) Suppose trader C sells their futures contract to trader B on day 4. What is the profit/loss for all three traders? (Note: assume all trades occur at the settle price in the table).
Market conditions are as follows; Exchange rate is USD 1 = JPY 130.00. USD market interest rate is 10% p.a. during the contract period, and JPY market interest rate is 6% p.a. during the contract period. The scheduled 'currency coupon' swap contract is as follows; the assumed principle amount is USD 100 million (JPY 13,000 million). Swap contract period is 2 years. You will pay 6.3 % in USD currency at the end of each year, and receive 6% in JPY currency at the end of each year. Calculate the NPV in JPY currency, using the original exchange rate of USD 1 = JPY 130.00.
Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (Note: assume all trades occur at the settle price in the table). (a) Suppose trader A buys a futures contract from trader B on day 1. What is the balance on their margin accounts by the end of day 2? (d) Suppose trader A sells their futures contract to close out their position on day 2. Trader C buys this futures contract. What is the balance on all margin accounts at the end of day 3 for traders with an open position? Did anyone receive a margin call on day 3, and if so, for how much?
In the US futures contract for Arabica, the most widely produced coffee beans, is traded at Intercontinental Exchange (ICE). Each contract covers 37,500 pounds of coffee. Suppose you long 5 Dec. 2022 contracts with the exercise price of 101.6 cents per pound. You are required to deposit $4,500 for each contracts in a margin account. Maintenance Requirement for each contract is $4,000. a) Suppose price of coffee in spot market jumps to 102.6 cents per pound. What will be the balance in your margin account? b) To what price coffee must change in order for you to get a margin call?
Assume today’s settlement price on a CME EUR futures contract is $1.3144 per euro. You have a short position in one contract. EUR125,000 is the contract size of one EUR contract. Your performance bond account currently has a balance of $1,900. The next three days’ settlement prices are $1.3130, $1.3137, and $1.3053. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day. Required: Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Suppose that on June 5, a Japanese Yen future contract is purchased at the ¥ 123 per dollar (opening price). Contract is for $ 5,000. Initial margin level is 15% of the value of the contract, and maintenance level is %10 of the value of the contract. The future price is ¥ 120 per dollar on June 6. There will be 15% increase in future price on June 7 and 8% decline on June 8? What is the value of the actual margin at the end of the date June 8? (ASSUMPTION: As margin account reaches above the initial margin level, withdraw the amount above the initial margin level)
As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each. How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them? Now End Spot 1.100-01 $/E 1.300-01 $/E Futures 1.120 $/E 1.315 $/E Forwards 1.130-31 $/E
On 15 April 2021, JHB Bank quoted the following spot and swap rates between the rand and the euro (ZAR/EUR) to a client called MAZDALtd.Rates quoted by JHB Bank on (ZAR/EUR): Bid – OfferSpot (ZAR/EUR) (Spot date: 15 April 2021): 15.7258 – 19.55672-month swap rate (i.e., Forward value date: 15 June 2021): 1290 – 135012-month swap rate (i.e., Forward value date: 15 April 2022): 7055 – 9534Other important informationExpected inflation rate in SA over next 12 months: 4.67%Expected inflation rate in euro area over next 12 months: 1.95%The price of one Apple MacBook computer in euro area: EUR 689The price of one Apple MacBook computer in South Africa: ZAR 22350Euro area 12-month interest rate: 3.50% South African 12-month interest rate: 8.90% 2.1 The exchange rate at which JHB Bank is willing to sell the ZAR spot is ____? 2.2 The exchange rate at which JHB Bank is willing to buy the EUR two months forward is _____? 2.3 The exchange rate at which MAZDA Ltd. will buy the EUR 12 months forward?…
Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (a) What’s an example of a hedger who might use this contract? (b) Assuming the USD has neither appreciated nor depreciated, has the Brazilian real appreciated or depreciated between days 1 and 4?