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Use 3 of Futures Contracts - pure speculation with leverage effect to +92U Example 8: Today, the gross price of a 5-year bond with $1,000 principal amount is 103.199. At the same moment, the price of the 5-year (meaning 5-year maturity for the underlying bond) future contract that expires in three months is 101.521. Its nominal amount is $1,000,000, and the deposit margin is $5,000. gnivhsbm od vu8 (9) An investor with $1,000,000 at disposal anticipates that rates will decrease in a short-term period. He can either invest in the bond or invest in the future contract. Two months later, the price of the bond turns to be 105.227 as the future price turns to be 103.537. Questions: 1) if investor invests in the bond, what is his profit or loss in two months? atqz I 2) if investor invest in the future contract, what is his profit or loss in two months?

Use 3 of Futures Contracts - pure speculation with leverage effect to +92U Example 8: Today, the gross price of a 5-year bond with $1,000 principal amount is 103.199. At the same moment, the price of the 5-year (meaning 5-year maturity for the underlying bond) future contract that expires in three months is 101.521. Its nominal amount is $1,000,000, and the deposit margin is $5,000. gnivhsbm od vu8 (9) An investor with $1,000,000 at disposal anticipates that rates will decrease in a short-term period. He can either invest in the bond or invest in the future contract. Two months later, the price of the bond turns to be 105.227 as the future price turns to be 103.537. Questions: 1) if investor invests in the bond, what is his profit or loss in two months? atqz I 2) if investor invest in the future contract, what is his profit or loss in two months?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter24: Enterprise Risk Management
Section: Chapter Questions
Problem 2P: A Treasury bond futures contract has a settlement price of 89’08. What is the implied annual yield?
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Use 3 of Futures Contracts - pure speculation with leverage effect to +92U Example 8: Today, the gross price of a 5-year bond with $1,000 principal amount is 103.199. At the same moment, the price of the 5-year (meaning 5-year maturity for the underlying bond) future contract that expires in three months is 101.521. Its nominal amount is $1,000,000, and the deposit margin is $5,000. gnivhsbm od vu8 (9) An investor with $1,000,000 at disposal anticipates that rates will decrease in a short-term period. He can either invest in the bond or invest in the future contract. Two months later, the price of the bond turns to be 105.227 as the future price turns to be 103.537. Questions: 1) if investor invests in the bond, what is his profit or loss in two months? atqz I 2) if investor invest in the future contract, what is his profit or loss in two months?
Transcribed Image Text:Use 3 of Futures Contracts - pure speculation with leverage effect to +92U Example 8: Today, the gross price of a 5-year bond with $1,000 principal amount is 103.199. At the same moment, the price of the 5-year (meaning 5-year maturity for the underlying bond) future contract that expires in three months is 101.521. Its nominal amount is $1,000,000, and the deposit margin is $5,000. gnivhsbm od vu8 (9) An investor with $1,000,000 at disposal anticipates that rates will decrease in a short-term period. He can either invest in the bond or invest in the future contract. Two months later, the price of the bond turns to be 105.227 as the future price turns to be 103.537. Questions: 1) if investor invests in the bond, what is his profit or loss in two months? atqz I 2) if investor invest in the future contract, what is his profit or loss in two months?
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