a company enters into a long futures contract to buy 4,000 barrels of oil for $62.50 per barrel. the initial margin is $62.50 x 4,000. what oil futures price will allow $2,000 to be withdrawn from the margin account

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02-07-2021
Business

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a company enters into a long futures contract to buy 4,000 barrels of oil for $62.50 per barrel. the initial margin is $62.50 x 4,000. what oil futures price will allow $2,000 to be withdrawn from the margin account

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anthougo anthougo · Answer 1 · 2021-07-02T21:11:48+02:00

Answer:

For $2,000 to be withdrawn from the margin account, the oil futures price must be $62.

Explanation:

a) Data and Calculations:

Price of the long futures contract to buy 4,000 barrels of oil = $62.50 per barrel

Initial margin = $62.50 * 4,000

b) If the futures price is fixed at $62 per barrel and the initial margin per barrel already opened with a broker is $62.50, then the security investor can withdraw $2,000 ($0.50 * 4,000) from the margin account. This will result in an excess of $0.50 per barrel. Computationally, $0.50 * 4,000 = $2,000.