# BOOK 6

4 gold futures contracts, each gold futures contract is for 100 ounces of gold. the futures price was \$350 per onuce. the initial markgin is \$1750 per contract and maintenance \$1312.50 per contract. Day 1 closeing future price is 345.50, day 2 \$348.75. what will the variation margin be on the first day a margin call is received A 1800 B 2200 in the short run, zaxon faces a horizontal demand curve at \$20 per unit, the average product of labor in the short run is given in the following table. resource units average product of labor 1 25 2 22.5 3 20 4 17.5 If the price of each unit of labor is \$350, and only whole unites can be employed, how many unites of labor will zaxon emply. A1 B2 C3 D4 Thank you !

should be b and b if i recall correctly

Barthezz, could you explain how you go the answer, please? Thank you for your time

I get answer “A” for the first question: Day Zero: Value of Contracts - \$140,000, Initial Margin - \$7,000 Day One: Value of Contracts - \$138,200, Margin - \$5,200. Oops, that’s only \$1,300 per contract so less than our maintenance margin. A margin call is received and we need to top up the margin account by \$1,800 to get back up to initial margin of \$1750 per contract.

For the second question, let’s look at the total revenue at each level of employment: 1 worker – 1 x 25 x 20 = \$500 2 workers – 2 x 22.5 x 20 = \$900 (2nd worker adds \$400, more than wage of \$350) 3 workers – 3 x 20 x 20 = \$1200 (3rd worker adds \$300, less than wage of \$350). Since the third worker is taking home in wages more than he is contributing, he should not have been hired. Two workers is the optimal number (answer is B).

Chebychev, the first question is 2200, I have no idea why, anybody?

I don’t know, 1800 strikes me as the right answer. I would be interested in any explanations.

lwang, you need to type the question correctly in order to get a correct answer. need to credit cpk for this one… to lazy to type it now! An investor holds a short position in four gold futures contracts. Each is for 100 ounces of golf. Starting price was 350\$/ounce. Initial margin = \$1,750 per contract and maintenance is \$1,312.50 per contract. Day 1 345.50 Day 2 348.75 Day 3 355.50 Day 4 356.25 What will the variation margin be on the first day a margin call is received? A. 500 B. 1,800 C. 2,200 D. 2,500 Initial Margin: 7000 Maint Margin = 5250 Day 1 Diff: (350 - 345.5) * 4 * 100 = 1800 Gain Day 2 Start Margin = 8800 Diff= (348.75 - 345.5) * 400 = -1300 Day 3: Start Margin = 7500 Diff = (355.5 - 348.75) * 400 = -2700 Day 4: Start margin = 4800 Fell below 5250 So variation margin = 7000 - 4800 = 2200 Choice C

Thanks barthezz, that explains it.