FINANCIAL MANAGEMENT: THEORY AND PRACT
15th Edition
ISBN: 9781305632455
Author: BRIGHAM E. F.
Publisher: CENGAGE L
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Chapter 23, Problem 3P
Summary Introduction
Determine: The implied interest rates on treasury bond and the new value of contract if the interest rates are increased by 1%.
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What is the implied interest rate on a Treasury bond ($100,000) futures contract that settled at 100’160? If interest rates increased by 1%, what wouldbe the contract’s new value?
Suppose that you purchase a Treasury bond futures contract at $95 per $100 of face value.
What is your obligation when you purchase this futures contract?
If an FI purchases this contract, in what kind of hedge is it engaged?
Assume that the Treasury bond futures price falls to 94. What is your loss or gain?
Assume that the Treasury bond futures price rises to 97. Mark your position to market.
A Treasury bond futures contract is selling for 94’160. What is theimplied annual yield?
Chapter 23 Solutions
FINANCIAL MANAGEMENT: THEORY AND PRACT
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- You purchase a $100,000 bond futures contract at 96.5. a) Assume that the bond futures price falls to 94. What is your gain/loss? b) Assume that the bond futures price rises to 98. What is your gain/loss?arrow_forwardWhich bond should an investor choose: Dollar-denominated bond Euro-denominated bond i$ = 6% i€ = 8% spot exchange rate = .90 euro/$1 expected future spot exchange rate = .96 euro/$1 Assume a 1-year time horizon. Show all calculations. Also, explain in words.arrow_forwardWhat is interest rate (or price) risk? Which bondhas more interest rate risk: an annual payment1-year bond or a 10-year bond? Why?arrow_forward
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