Question

Bill Baher, a private investor, purchased a futures contract on Treasury bonds at a price of 102-12. Two months later, Baher sells the same futures contract in order to close out the position. At that time, the futures contract specifies 103-15. What is Baher's nominal profit? The par value of the futures contract is $100,000.

a. $1,030.00; profitb. $1,030.00; lossc. $1,093.75; profitd. $1,093.75; losse. none of the above

Answer 1

Answer:

c. $1,093.75; profit

Explanation:

the second term stand for portion of the nearest 1/32

this means : it was purchased at:

                   102 + 0.01 x 12/32

and sold at 103 + 0.01 x 15/32

difference: 1 + 0.01 x 3/32

$100,000 x (1 + 0.01 x 3/32) =

100,000 x 0.0109375 = 1,093.75