3.Fixed Income Derivatives

The ZB US Treasury Bond Futures contract has a par of $100,000, an initial margin of $4,620, a maintenance margin of $4,200.The duration is 5 years and it is priced at 99.As an investor you open a futures trading account with $100,000.

A.)How many contracts can you open (long)?

B.)If the interest rates fall by 30 basis points, what is your ROI?

C.)If the interest rates fall by 30 basis points, what is your dollar profit?

D.)At what point will you get a margin call?Be specific.

E.)If the Federal Reserve started to raise the interest rates, would you

a.Stay long?

b.Reverse and go short?

c.Desire to increase or decrease your portfolio duration