Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Assume a borrower has sold 90-day BAB futures to hedge interest rate risk on a 180-day loan worth $30m. The 90-day BAB futures contract is
Assume a borrower has sold 90-day BAB futures to hedge interest rate risk on a 180-day loan worth $30m. The 90-day BAB futures contract is quoted at 96.95. The loan will be borrowed in 4 months time. If the futures settlement price is 96.75in 4 months time, what is the dollar gain or loss from the futures position? Round your answer to the nearest dollar.
(a)A loss of $14,567
(b)A gain of $14,567
(c)A loss of $29,135
(d)A gain of $29,135
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started