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Chapter 5: Q3CP (page 591)

A silver futures contract requires the seller to deliver 5,000 Troy ounces of silver. Jerry Harris sells one July silver futures contract at a price of \(28 per ounce, posting a \)6,000 initial margin. If the required maintenance margin is $2,500, what is the first price per ounce at which Harris would receive a maintenance margin call?.

Short Answer

Expert verified

$28.70

Step by step solution

01

Given information

Initial margin = $6,000

Maintenance margin = $2500.

02

Calculation of increase in futures price

Increase in future Price = (Initial Margin – Required Maintenance Margin) / Number of Silver Ounce

=$6,000-$2,500/$5,000

=$0.70

03

Calculation of futures price at which Harris receive Maintenance margin call

Future Price = Selling price per ounce + Increase in Price

=$28+$0.70

=$28.70

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