Margin accounts


2 0
Q3.b) The table below depicts mark-to- market of a futures contract between a Cassava Farmer and Gari Processor:
Use it to answer question 3 b.

Time/Day Gari Farmer’s
Margin Account Quoted Future Price Gari Processor’s
in the Market Margin Account

4 80.00 130.00 80.00
3 80-10=70 140.00 80+10=90
2 70-10=60 150.00 90+10=100
1 60+20=80 130.00 100-20=80
0 80+10=90 120.00 80-10=70

i) Proof the strike price based on the table [2 marks]
ii) Indicate the shortcomings of the table [2 marks]
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