Should the bank go long or short on the futures contracts

Assignment Help Financial Management

Reference no: EM131513618

Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 106 − 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? Long Short b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 106 − 210. (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)) Net profit $ c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 105 − 270. (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)) Net profit $

Reference no: EM131513618

Questions Cloud

Compute the displacement : For the truss in Figure P8.3, compute the horizontal and vertical components of the displacement of joint C. The area of all bars = 2500 mm2, and E = 200 GPa.

long position in a call option on IBM common stock : You have taken a long position in a call option on IBM common stock. What is your net profit if IBM’s stock price decreases to $149?

What are portfolio weights of each stock : what are the portfolio weights of each stock?

Will the frame sway horizontally : The pin-connected frame in Figure P8.3 is subjected to two vertical loads. Compute the vertical displacement of joint B. Will the frame sway horizontally?

Should the bank go long or short on the futures contracts : Should the bank go long or short on the futures contracts?

Dividend initiation and stock value : Dividend Initiation and Stock Value A firm does not pay a dividend. compute the value of this stock.

Determine the value of the force p : Determine the value of the force P that must be applied to joint C of the truss in Figure P8.7 if the vertical deflection at C is to be zero.

Does tanner staging vary from culture to culture : Does Tanner staging vary from culture to culture? Why or why not? Support your answers with citations, giving an example of one culture.

What was the capital gain of tips in dollars : What was the capital gain of the TIPS in dollars?

User Account

All Pages