Answer: $35 drop

## Explanation To determine the price change that triggers a margin call, we need to calculate: **Step 1: Calculate maintenance margin per contract** - Initial margin per contract = $14,000 - Maintenance margin = 75% of initial margin = 0.75 × $14,000 = $10,500 per contract **Step 2: Calculate total margin levels** - Total initial margin = 5 contracts × $14,000 = $70,000 - Total maintenance margin = 5 contracts × $10,500 = $52,500 **Step 3: Calculate maximum allowable loss before margin call** - Maximum loss allowed = Total initial margin - Total maintenance margin - Maximum loss allowed = $70,000 - $52,500 = $17,500 **Step 4: Calculate price change per ounce** - Each contract represents 100 troy ounces - Total ounces = 5 contracts × 100 ounces = 500 ounces - Price change per ounce = Total loss allowed ÷ Total ounces - Price change per ounce = $17,500 ÷ 500 = $35 per ounce **Step 5: Determine direction of price change** Since this is a **long** position, a **drop** in gold price will cause losses and trigger a margin call. Therefore, a **$35 drop** in the gold futures price will lead to a margin call. **Verification:** - Price drop of $35 per ounce - Loss per contract = 100 ounces × $35 = $3,500 - Total loss = 5 contracts × $3,500 = $17,500 - Remaining margin = $70,000 - $17,500 = $52,500 (exactly at maintenance margin level)

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