*Please just answer b & e all other questions have been answered**

Question 4. (20 points) A Treasury bond futures contract settles at 103'16.

a. Calculate the present value of one futures contract in dollars?

Current bond Percentage	103.50	103.5%
Present value of future contract	$ 103,500

b. Are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.

c. Calculate the implied annual interest rate on the futures contract.

Treasury bonds	$ 100,000
Settle Price of 103'16	103.50
Settle Price of bond	$ 103,500
Cupon per annum	$ 6,000
Implied interest rate treasury bond	3.500%

d. Calculate the new value of the futures contract if interest rates increase by 1 percentage point annually.

Treasury bonds	$ 100,000
Settle Price of 103'16	103.5
Settle Price of bond	$ 103,500
Coupon per annum	$ 6,000
Implied interest rate treasury bond	3.500%
Implied annual interest increase + 1%	4.500%
Value of the futures contract	$99,043.06

e. Describe differences between forward and futures contracts? Illustrate, using a specific example, of how companies could use either a futures or forward contract to hedge a position.