On the morning of Monday, August 21, you purchased one futures contract for 100,000 Canadian dollars at a rate of 0.7 USD/CAD. You deposited 7000 USD into your margin account, and your broker requires 5000 USD as the maintenance margin. The subsequent settlement prices are shown in the table below. What are the daily cash flows from marking to market? What are the daily cash balances in your margin account (after the margin call and new deposits)? When do you receive a margin call and how much do you deposit into your account?
August 21 22 23 24 25 28 29
Futures Rate 0.71 0.7 0.72 0.71 0.69 0.68 0.66
30
0.63
Daily cash flow
Cash balance (after margin call)
On the morning of Monday, August 21, you purchased one futures contract for 100,000 Canadian dollars at a rate of 0.7 USD/CAD. You deposited 7000 USD into your margin account, and your broker requires 5000 USD as the maintenance margin. The subsequent settlement prices are shown in the table below. What are the daily cash flows from marking to market? What are the daily cash balances in your margin account (after the margin call and new deposits)? When do you receive a margin call and how much do you deposit into your account?
August 21 22 23 24 25 28 29
Futures Rate 0.71 0.7 0.72 0.71 0.69 0.68 0.66
30
0.63
Daily cash flow
Cash balance (after margin call)
Related questions
Latest yield data available for Canadian Yields are as follows. Each rown represents a zero-coupon bond. The columns represent maturity in years.
| Date | 1 yr | 2 yr | 3 yr | 4 yr | 5 yr | 10 yr | 15 yr | 20 yr | 25 yr | 30 yr | |||||||||
| 16-04-2015 | 0.64% | 0.54% | 0.58% | 0.68% | 0.80% | 1.42% | 1.89% | 2.12% | 2.16% | 2.12% | |||||||||
| 17-04-2015 | 0.66% | 0.59% | 0.63% | 0.72% | 0.84% | 1.46% | 1.90% | 2.12% | 2.15% | 2.12% | |||||||||
| 20-04-2015 | 0.68% | 0.61% | 0.65% | 0.75% | 0.87% | 1.47% | 1.92% | 2.13% | 2.17% | 2.13% | |||||||||
| 21-04-2015 | 0.70% | 0.61% | 0.65% | 0.76% | 0.89% | 1.50% | 1.94% | 2.14% | 2.18% | 2.14% | |||||||||
| 22-04-2015 | 0.69% | 0.63% | 0.69% | 0.80% | 0.94% | 1.55% | 1.98% | 2.19% | 2.22% | 2.18% | |||||||||
| 23-04-2015 | 0.69% | 0.62% | 0.67% | 0.78% | 0.91% | 1.54% | 1.97% | 2.17% | 2.21% | 2.17% | |||||||||
| 24-04-2015 | 0.71% | 0.59% | 0.64% | 0.74% | 0.87% | 1.49% | 1.93% | 2.14% | 2.18% | 2.14% | |||||||||
| 27-04-2015 | 0.69% | 0.61% | 0.65% | 0.75% | 0.88% | 1.51% | 1.95% | 2.16% | 2.20% | 2.16% | |||||||||
| 28-04-2015 | 0.69% | 0.64% | 0.70% | 0.82% | 0.96% | 1.61% | 2.04% | 2.25% | 2.29% | 2.25% | |||||||||
| 29-04-2015 | 0.70% | 0.64% | 0.71% | 0.83% | 0.98% | 1.65% | 2.08% | 2.28% | 2.32% | 2.28% | |||||||||
| 30-04-2015 | 0.72% | 0.65% | 0.71% | 0.84% | 0.98% | 1.66% | 2.08% | 2.27% | 2.31% | 2.27% |
1-Use the expectations hypothesis to calculate and predict interest rates as follows:
a-If the one-year interest rate is expected to be the same as the yield curve over the next three years, what interest rate is expected on a two-year bond one year from now?
b-What interest rate is expected on a three-year bond one year from now?
c-What relationship do you find between interest rates and maturity?
d-If investors attach term premiums of 0.0025, 0.0075 and 0.0085 to the one-, two- and three- year bonds:
i-What would be the interest rate on a two-year security?
ii-What would be the interest rate on a three-year security?
iii-What is the forward rate for one-year Canada bonds one year from now?
iv-What is the adjusted forward rate for one-year Canada bonds one year out?
2-After describing the current yield curve and forecasting interest rates using both the expectations and preferred habitat and liquidity premium methods above,
a-What is your recommended minimum interest rate for the five-year fixed rate loans?
b-How would this rate be adjusted for customers that have some credit risk?
