After taking this class you fancy yourself a savvy commodities investor and take

Question

After taking this class you fancy yourself a savvy commodities investor and take a job on the Chicago Mercantile Exchange. Your first day on the job you purchase 4 contracts for pork bellies at $88.80 for delivery this coming April. This required a 10% deposit. The spot price in April is $101.20. How much money did you make (and you did make some money on this deal) and what was the return on your invested capital?

Details:

4 * .888 * 50000 = $177600 market value of contracts

10% * $177600 = $17760 equity capital required to make the transaction

Explanation / Answer

Money made=4*(101.2-88.8)*500=24800

Return on invested capital=24800/17760-1=39.6%

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