Julie Wells has found a Treasury Bond futures contract whose underlying's duration is 8.5 years and is currently selling for $97,500.Interest rates are currently 8% and are expected to rise by 1.5%.What is the expected change in the future contract's price for this change in interest rates?

Question

Quizplus · Accepted Answer

The expected change in the future contract's price can be calculated using the formula: Change in Price = -Duration × Change in Interest Rate × Current Price. Here, Duration = 8.5 years, Change in Interest Rate = 1.5% or 0.015, and Current Price = $97,500. Thus, Change in Price = -8.5 × 0.015 × 97,500 = -$11,510.42.

Julie Wells Has Found a Treasury Bond Futures Contract Whose