Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 113 - 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000. a. Should the bank go long or short on the futures contracts? b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 113 - 220. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 112 - 280. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) a. The futures contracts b. Net profit c. Net profit
Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 113 - 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000. a. Should the bank go long or short on the futures contracts? b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 113 - 220. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 112 - 280. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) a. The futures contracts b. Net profit c. Net profit
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A 40.
![Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 113 - 100. Dudley
Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is
$100,000.
a. Should the bank go long or short on the futures contracts?
b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 113 -
220. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2
decimal places. (e.g., 32.16))
c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 112 -
280. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2
decimal places. (e.g., 32.16))
a.
b.
C.
The futures contracts
Net profit
Net profit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F323c9976-6b7b-4414-aa82-41105edc66ec%2F5e484d34-3119-4090-b389-150e8da2df42%2Fqouhd7e_processed.png&w=3840&q=75)
Transcribed Image Text:Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 113 - 100. Dudley
Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is
$100,000.
a. Should the bank go long or short on the futures contracts?
b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 113 -
220. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2
decimal places. (e.g., 32.16))
c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 112 -
280. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2
decimal places. (e.g., 32.16))
a.
b.
C.
The futures contracts
Net profit
Net profit
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