Part 1 Marks 70 1. On 25 April 2003 a trader bought three Australian dollar futu

ID: 2807586 • Letter: P

Question

Part 1 Marks 70 1. On 25 April 2003 a trader bought three Australian dollar futures contracts at 0.5400 (USD/AUD). Calculate the US dollar value of the three contracts, where the size of the Australian dollar futures contract is AUD 100,000. Assuming no daily price limit and no maintenance margin, calculate the value of the three Australian dollar futures contract and daily variations in the margin account as the settlement rate assumes the following values: 10 26 April 0.5600 27 April 0.5730 28 April 0.5430 29 April 0.5580 Date Settlement rate Value Margin account 25-Apr 0.540 26-Apr 0.560 27-Apr 0.573 28-Apr 0.543 29-Apr 0.558

Explanation / Answer

Value of contract = Exchange rate * Size of 1 contract

Value of 1 contract = 0.540 * 100,000 = 54000

Value of 3 contract = 3*54000 = 162,000

Variation in margin = (Exchange rate today -exchange rate last day)*Contract size *No. of contracts

Margin on 26 apr = (0.560 -0.540)*100,000 *3

Margin on 26 apr = $ 6000

Date

Settlement rate

Value

Margin Account

Total in margin account

25-Apr

0.540

$ 1,62,000

$ -

26-Apr

0.560

$ 1,68,000

$ + 6,000

$ 6,000

27-Apr

0.573

$ 1,71,900

$ + 3,900

$ 9,900

28-Apr

0.543

$ 1,62,900

$ - 9,000

$ 900

29-Apr

0.558

$ 1,67,400

$ + 4,500

$ 5,400

Since there is no maintenance margin, the margin on 25th apr is 0.