Explanation:
($2.40 − $2.50) × 5,000 bushels = −$500. The maintenance level is $1,000 × 0.75 or $750. Since a futures investor must bring the margin account back to the initial level, the investor must make a deposit of $500.
(Book 3, Module 33.2, LO 33.c)
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Question 88
A commodity trader buys one August 5,000 bushel corn futures contract at $2.50 per bushel. The initial margin deposit is $1,000 and the maintenance margin is $750. At the end of the next day the spot price of corn is $2.45 and the price of August corn has fallen to $2.40. The deposit required to bring the account back to the required level is closest to:
A
$250.
B
$500.
C
$750.
D
$1,000.
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