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9 October, 01:40

Yesterday, you entered into a futures contract to buy €62,500 at $1.50 per €. Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted?

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  1. 9 October, 02:02
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    The settle price at which you will get a demand for additional funds to be posted is $1.4840 per €.

    Explanation:

    Provided data from the question;

    Futures contract to buy in euros = €62,500

    Future contract to buy in dollar = $93,750 (€62,500 * $1.50)

    Initial performance of bond = $1,500

    Maintenance level = $500

    To determine the settle price at which you get a demand for additional funds to be posted =

    Future contract to buy in dollar - (initial bond performance - maintenance level) : future contract to in euros

    $93,750 - ($1,500 - $500)

    = $93,750 - $1,000

    $92,750 : €62,500

    = $1.484
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