How much must you initially remit in order to be able to short gold future?

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Today is the third Friday of March (3/21). The JuneFUTURE price of gold is $1,250. Future contracts are for 100 ounces of gold, and the margin requirement is $5,000 per contract. The maintenance margin requirement is $2,500. You expect the price of gold to go down; therefore you short one June gold future contract at the prevailing price of $1,250. Show your work, the only answer is not acceptable.

A. How much must you initially remit in order to be able to short gold future?

B. Estimate your profit or loss both in the dollar and in percent if next week you cover your short at $1,285.

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C. If the spot (Cash) price of gold is $1230/OZ and if the risk-free rate is 4%, what should be the June gold future price?(Assume three months left from 3/21 to 6/21 expiration of June future)

 

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