You bought 100 Swiss franc futures contract (size is SFr 125,000) ata price of $0.9535. If the spot rate for the Swiss franc $0.98450, what is your gain or loss on this trade? at the date of settlement is SFr 1 (A) $3,875
(B) $387,500
(C)-$3,875
(D)-$387,500

Option B, $387,500, is the right answer.

Explanation:

Total number of Swiss franc ( contract) = 100

Size of contract = 125000

Purchase price = $0.9535

Settlement price = $0.98450  

Below is the calculation:

Gain on the trade = ( Price at the date of settlement - purchase price ) x number of contracts x size of the contract

Gain on the trade  = ( $ 0.98450 - $ 0.9535 ) x 100 x 125,000

Gain on the trade  = $ 387,500

The required marginal profit function is:

Explanation:

The marginal profit is the profit earned by producing one extra unit of the product.

The revenue function is

The cost function is

The profit function is

The marginal profit is the derivative of the profit function.

Therefore the required marginal profit function is: