23. Refer to Exhibit 21.1. What is the dollar gain or loss assuming that future conditions described in Case 1 actually occur? (Ignore commissions and margin costs, and assume a naive hedge ratio.) a. $2,945,000.00 gain b. $65,500.00 gain C. $2,945,000.00 loss $65,500.00 loss e. None of the above ANS: D Payoff on futures position: $100,000(.78875 - .7593) = $2,945 per contract Times 1,000 contracts = $2,945,000 gain Annual interest increase = (11.00 - 10.50) = .5% Or $100,000,000(0.005) = $500,000 per year Present value of increased interest at 10.5% for 10 years = $3,010,500 Net loss = $2,945,000 - $3,010,500 = ($65,500) PTS: 1 OBJ: Multiple Choice