Choose the correct answer:O The trader gains $10,000.The trader loses $15,000.The trader gains $5,000.The trader loses $10,000.The trader loses $5,000. On June 1, 2023 a trader entered into a position in futures contracts to buy 200 ounces of gold inDecember 2023 for $2,000 per ounce.The December futures gold price falls during June so that the trader receives several margin callsand has to provide variation margins on her margin account, in total $5,000 by June 30.On June 30, she decides to close out her position at the then prevailing December gold futuresprice of $1,950 per once.What is the trader's total profit or loss from her trade?

Futures are derivative products and these are large quantity trades done on the margins but margins…

Answered: O The trader gains $10,000. O The…

O The trader gains $10,000. O The trader loses $15,000. O The trader gains $5,000. The trader loses $10,000. The trader loses $5,000.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: our firm has 1,500,000 in stock assets with a duration of 16 and 500,000 in cash with a duration of…

A: Duration of equity is calculated as shown below.

Q: (a) Proctor Plc. is a computer manufacturing company that is considering diversifying into financial…

A: The capital structure of a corporation is defined as its funding mix, which includes both debt and…

Q: A-Rod Manufacturing Company is trying to calculate its cost of capital for use in making a capital…

A: The growth rate in dividends, often referred to as the dividend growth rate, is a financial metric…

Q: Ms. Khan is preparing for her daughter's future wedding expenses. Her daughter is currently 15 years…

A: Financial planning is an essential aspect of securing a stable future. Ms. Khan is currently…

Q: Suppose that a hedge fund uses the value factor strategy and rebalances the portfolio once a year at…

A: A hedge fund is a type of investment fund that pools capital from accredited investors or…

Q: Mukesh purchased a $2,000 face value bond on January 2, 2022 for $2,000. The bond was issued on the…

A: Face Value $ 2,000.00PV $ 2,000.00Maturity,Year5Interest rate6.00%Compounding period2.00

Q: There are three securities in the market whose return on market portfolio yield the following…

A: In regression analysis, the term "yield" typically refers to the dependent variable or the variable…

Q: Firms HL and LL are identical except for their financial leverage ratios and the interest rates they…

A: Return on invested capital is computed by dividing the earnings after tax by total invested…

Q: Assume that the interest rate is 5%, continuously compounded annually, and consider call and put…

A: Arbitrage is a trading strategy capitalizing on price differences between related financial…

Q: Suppose that you work for a Kentucky Bourbon distillery and you export to the European Union. The…

A: When a currency appreciates means that the value of the currency increases against other currencies…

Q: Moby Dick Corporation has sales of $4,920,229; income tax of $574,192; the selling, general and…

A: firm’s after-tax cash flow from operations= sales - cost of goods sold - selling, general and…

Q: If Alexandra deposits $1000 from her pay cheque into her cheque account and at the same time…

A: When Alexandra deposits $1000 from her paycheck into her checking account and simultaneously…

Q: If the client is not an employee, but works for himself or in partnership with others, or is an…

A: In the case of the self-employed, it is based on pre-tax but after-expense (net) income.In the case…

Q: day is 1 July, 2022, Georg plans to purchase a corporate bond with a coupon rate of j2 = 6.96% p.a.…

A: Bonds are a source of investment and finance and bonds carry a coupon payment each period and par…

Q: Below are the US individual tax rates for 2022. What is the effective tax rate of a Single…

A: Total taxable income = $77,000Tax liability = (10275 x 10%) + [(41775 - 10275) x 12%] + [(77000 -…

Q: Consider the two mutually exclusive investment projects given in the table below for which MARR -9%.…

A: Summary about the question:Project A and Project B have unequal lives. In order to carry out…

Q: Use the method of averages to find the approximate yield rate for the bond with the following…

A: Compound = Semiannually = 2Face Value = fv = $19,000Coupon rate = 7 / 2 = 3.5%Time = nper = 5 * 2 =…

Q: The following has been extracted from the financial statements of Rowett: Statement of profit or…

A: Factoring refers to the selling of business accounts receivables to the financing party in order to…

Q: 3. Casey took out a $425,000, 12-year mortgage with an APR of 4.5%. The first month she made an…

A: We take mortgage to buy expensive things and items like a house, a car etc.The mortgage loan is…

Q: For every 10 years you delay before starting retirement, you will need to save times as much each…

A: The exact multiplier depends on several factors, including the expected rate of return on…

Q: What are municipal bonds? What characteristics makes them especially attractive to high-income…

A: Bonds are debt instruments issued by entities. Different kinds of entities can issue bonds and the…

Q: 5B) After one year you will receive a series of annual interest payments of $1105 for 10 years. At…

A: The maximum amount payable for a bond is the fair value of a bond computed considering the cash…

Q: pose you ha an investment portfolio with fraction x invested in a market portfolio and (1-x) in a…

A: The concept of adjusting the allocation between a market portfolio and a risk-free asset in an…

Q: Shirley and Sons pays no dividend at the present time. The company plans to start paying an annual…

A: The Dividend Discount Model (DDM) is a financial valuation approach used to estimate the intrinsic…

Q: Assume the Black-Scholes market model dSt=oSt dBt. So > 0, Dt = e-rt. Let Ot be a derivative with…

A: The Black-Scholes model is a widely used mathematical formula in finance for valuing European-style…

Q: Pls help ASAP

A: Determining the actual cash value of a building is a crucial process often undertaken in insurance…

Q: went from $0.00887619 to $0.00906626. • By how much did the yen appreciate against the dollar? • By…

A: In the market the exchange rate of one currency with the other keeps changing that depending on the…

Q: c. is preparing its cash budget. It expects to have sales of $32,500 in January, $50,000 in…

A: In company most of the sales are done on credit and less on cash and cash is limited for companies…

Q: You purchased four September corn futures contracts at what turned out to be the lowest price of the…

A: Future contracts are to be settled later on at a specific date and specific price but these are…

Q: You are saving for a new car. You place $14,200 into an investment account today. How much will you…

A: Future value refers to the monetary worth of an investment or cash flow at a future date, assuming…

Q: Which of the following is Correct? Cash dividend has no impact on the market value of the company.…

A: Stock also known as equity or shares represents ownership in a corporation. Stock is a type of…

Q: Currently the risk-free rate equals 5% and the expected return on the market portfolio equals 11%.…

A: The risk-reward ratio is a fundamental concept in finance and investing that assesses the potential…

Q: ng a three-year project to build lasers for tattoo removal. The project will require upfront…

A: Net present value is time value based capital budgeting and can be found as the difference between…

Q: Assume a security follows a geometric Brownian motion with volatility parameter = 0.2. Assume the…

A: An option is a financial derivative that provides the holder the right, but not the obligation, to…

Q: You are repaying a loan of ${A} by making payments at the end of every quarter for {B} years.…

A: Here, Loan Amount (A) $ 54,000.00Time Period in years (B)5Interest Rate ©2.15%Compounding Period…

Q: Suppose the index model for stocks A and B is estimated with the following results: rA = 2% +…

A: Variance is a statistical measure that quantifies the dispersion or spread of a set of data points…

Q: How much interest is paid in total on a 3-year loan for $30 000? The interest rate is 8.7%…

A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

Q: Miguel deposits 5000 into an investment today that earns 5.2% compounded annually and maturing in 3…

A: Miguel Deposit value = $5,000Interest rate = 5.2% compounded annuallyNo of years = 3 yearsAnderson…

Q: Skis are listed by a manufacturer for $860, less trade discounts of 35% and 17%. What further rate…

A: This is a case of three successive discounts.Successive discounts means discount on the discount.We…

Q: Jim and Joan Miller are borrowing $120,000 at 6.5% per annum compounded monthly for 30 years (360…

A: A loan is a financial transaction where a lender provides a borrower with a specific amount of…

Q: You buy 6 call options with a contract size of AUD 30,000. They have a USD/AUD st premium of 7.86…

A: Call option gives the opportunity to buy the currency on the expiration but there is no obligation…

Q: tion date is in 3 months. The risk-free interest rate is 8%. The upper and lower bounds for the…

A: The price of an American Call on a non - dividend paying stock is $4. The stock price of $31, the…

Q: Consider an American Put option with time to expiry of 5 months and a strike price of 82. The…

A: The binomial model is a mathematical model used in finance to value options. It assumes that the…

Q: Continuing on from the previous question assume the rate of interest is 12%. 18) What's the present…

A: Cost of energy efficient refrigerator = $1723No of years = 10 yearsSavings in Energy = $40NPV is the…

Q: Find the selling price of an item which has a cost price of $15.61 and is sold at a loss of 371/2 %…

A: Hi studentSince there are multiple questions, we will answer only first question.Profit or loss is…

Q: Your employer offers a 401(k) plan with a 32% match, and you set a goal of retiring in 26 years with…

A: Number of years =26Nominal rate of return =2%inflation rate =1.2%Present Value =1.7 million dollars…

Q: Assuming a cost of capital of 5% and that $60,000 is the correct profit estimate each year for the…

A: Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…

Q: A mortgage pass-through security (PT) has a par value of $100,000, a 4% coupon paid monthly, and is…

A: To calculate the price of the mortgage pass-through security (PT), we can use the formula for the…

Q: Wholesome A new Wholesome restaurant can be opened in Cape Town. This will however require funds,…

A: Interest rate = 8.9% compounded monthly payments made by feast =R 1036400NPER For payments made by…

Question

Choose the correct answer:
O The trader gains $10,000.
The trader loses $15,000.
The trader gains $5,000.
The trader loses $10,000.
The trader loses $5,000.

On June 1, 2023 a trader entered into a position in futures contracts to buy 200 ounces of gold in
December 2023 for $2,000 per ounce.
The December futures gold price falls during June so that the trader receives several margin calls
and has to provide variation margins on her margin account, in total $5,000 by June 30.
On June 30, she decides to close out her position at the then prevailing December gold futures
price of $1,950 per once.
What is the trader's total profit or loss from her trade?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define=future contracts

VIEW

Step 2: Option 2 is correct

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

An investor purchases a stock for $38 and a put for $.50 with a strike price of $35. The investor sells a call for $.50 with a strike price of $40. What is the maximum profit and loss for this position? (Loss amount should be indicated by a minus sign.) Maximum profit Maximum loss $ GAGA
An investor purchases a stock for $38 and a put for $.50 with a strike price of $35. The investor sells a call for $.50 with a strike price of $40. What is the maximum profit and loss for this position? Maximum profit
The price of a stock is $64. A trader buys 1 put option contract on the stock with a strike price of $60 when the option price is $10. When does the trader make a profit? a. When the stock price is below $50 b. When the stock price is below $54 c. When the stock price is below $60 d. When the stock price is below $64
The price of a stock is $67. A trader sells 5 put option contracts on the stock with a strike price of $70 when the option price is $4. The options are exercised when the stock price is $69. What is the trader's net profit or loss? O Loss of $1,500 O Loss of $1,000 Gain of $1,000 Gain of $1,500 None of these < Previous Next
A trader buys a call option with a strike price of $30 for $3. Does the trader ever exercise the option and lose money on the trade. Explain.
Suppose that an investor purchases the common stock at the current market price of $58/share and simultaneously sells for $12 a call to buy the shares at the strike price of $50. At the expiration of the call, price of stock is $77. What is the net profit on the position for this investor? (Round your answer the nearest dollar, do not enter with the dollar sign)
A dealer writes a March put option with a strike price of $30. The price of the option is $4. Under what circumstances does the dealer make a profit of $4? Select one:a.The dealer makes a profit of $4 if the price of the stock is below $26 at the time of exercise. b.The dealer makes a profit of $4 if the price of the stock is above $30 at the time of exercise. c.The dealer makes a profit of $4 if the price of the stock is below $30 at the time of exercise. d.The dealer makes a profit of $4 if the price of the stock is above $26 at the time of exercise. A trader enters into a short greasy wool futures contract when the futures price is $11.70 per kg. The contract is for the delivery of 2,000 kgs clean weight. How much does the trader gain or lose if the greasy wool at the end of the contract is $11.50 per kg? Select one:a.The trader gain $ 40. b.The trader loss $ 400. c.The trader gain $ 400. d.The trader loss $ 40.
8. An investor sells a futures contract an asset when the futures price is $1,500. Each contract is on 100 units of the asset. The contract is closed out when the futures price is $1,540. Which of the following is true A. The investor has made a gain of $4,000 B. The investor has made a loss of $4,000 C. The investor has made a gain of $2,000 D. The investor has made a loss of $2,000
The price of a stock is $64. A trader buys 1 put option contract (each contract is for 100 options) on the stock with a strike price of $60 when the option price is $10. When does the trader make a profit? When the stock price is below $54 O When the stock price is below $60 O When the stock price is below $50 O When the stock price is below $64 ◄ Previous Next ▸
Refer to the following chart. An investor (a day trader) always buys 500 shares of stock at the market close price and sells them at the last sale price, paying a $30 commission per transaction. The stock the trader bought is MSLV. (a) Find the total cost.$ (b) Find the return for the day.$ (c) Find the percent of return. (Round your answer to one decimal place.)
2. Suppose you buy shares of a stock worth OMR20000 and the initial margin is 50% and the maintenance margin is 30%. A. How much money must you pay the broker for the shares? How much have you borrowed from the broker? B. Suppose the price of the stock falls so that the shares are only worth OMR10000. What would be your nev account equity? C. How much money you need to give the broker to meet the maintenance margin?
Suppose a trader buys a stock at $70, buys a put option on the same stock with strike X at a price p=$10 and borrows $80 at r= 0%. For what values of the strike price X will this trader always make money regardless of St

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS