M2_Assignment 2: Valuation of Futures Contracts - AU 434

Assignment 2: Valuation of Futures Contracts

Assume today’s settlement price on a CME Eurodollar futures contract is $1.3140/ED. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next three days’ settlement prices are $1.3126, $1.3133, and $1.3049.

In a 3-4 page paper, calculate the changes in the performance bond account from daily marking-to-market and the balance of the performance bond account after the third day (show your calculations). How would your results change assuming you have a long position in the futures contract? Describe three factors that might affect the financial results of a firm conducting business internationally which could ultimately impact the performance bond account.

Use the following file naming convention: LastnameFirstInitial_M2_A2.doc. For example, if your name is John Smith, your document will be named SmithJ_M2_A2.doc.

By the due date assigned, deliver your assignment to the Submissions Area.

Assignment 2 Grading CriteriaMaximum PointsCorrectly calculated the change in the value of the bond account over the three-day period28Contrasted the value of the holdings if a short or long position were held.28Identified and explained the factors that effect the financial holdings of a multinational business operation.28Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.16Total:100