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Essentials Of Investments
Found in: Page 588
Essentials Of Investments

Essentials Of Investments

Book edition 9th
Author(s) Zvi Bodie, Alex Kane, Alan Marcus, Alan J. Marcus
Pages 748 pages
ISBN 9780078034695

Short Answer

You purchase a Treasury-bond futures contract with an initial margin requirement of 15% and a futures price of $115,098. The contract is traded on a $100,000 underlying par value bond. If the futures price falls to $108,000, what will be the percentage loss on your position?

Answer

Loss of 41.11%

See the step by step solution

Step by Step Solution

Step 1: Given information

Future’s price = $115,098

Margin requirement = 15%

Margin = $115,098 x 0.15 = $17,264.70

Step 2: Calculation of percentage loss

Future price fall to = $108,000

Total loss = $115,098 - $108, 000 = $7,098

Percentage loss = Total loss / Total price

= $7,098 / $17,264.70

= 41.11%

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