Question:

The company expects to borrow approximately $1 million in three months. The current rate of interest is 6.00% p.a. but is forecast to rise. To hedge the position, the company wishes to use 3-year Treasury bond futures contracts trading at 93.500.

Calculate the profit or loss from the position in futures market if in 3 months the contracts are trading at 95.000.

Select one:

a). 40,972.1 Loss

b). 40,972.1 Profit

c). 40,628.94 Loss

d). 40,628.94 Profit

Please proper explain and do not copy from Chegg. Otherwise I have to report the answer.