What is the profit on a hedge if bonds are purchased at $150,000,two futures contracts are sold at $72,500 each,then the bonds are sold at $147,500 and the futures are repurchased at $74,000 each?
A)-$2,500
B)-$5,500
C)-$500
D)-$3,000
E)none of the above

Question

Quizplus · Accepted Answer

The loss on the bonds is $150,000 - $147,500 = $2,500. The gain on the futures is ($72,500 - $74,000) * 2 = -$3,000. The total profit is -$2,500 + $3,000 = $500.

What Is the Profit on a Hedge If Bonds Are