Question
Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 114 100. Dudley Savings thinks interest
Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 114 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000. a. Should the bank go long or short on the futures contracts? b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 114 230. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 113 290. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
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