Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day.

Chapter 7 problemsFINC 63671 Chapter 7 Problems

1. Assume today’s settlement price on a CME EUR futures contract is $1.3140/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next three days’ settlement prices are $1.3126, $1.3133, and $1.3049. Calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day.

2. Do problem 1 again assuming you have a long position in the futures contract.

3. Using the quotations in Exhibit 7.3, note that the September 2016 Mexican peso futures contract has a price of $0.05481 per MXN. You believe the spot price in September will be $0.06133 per MXN. What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?

6. Using the market data in Exhibit 7.6, show the net terminal value of a long position in one 90 Sep Japanese yen European call contract at the following terminal spot prices (stated in U.S. cents per 100 yen): 81, 85, 90, 95, and 99.