Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However, the U.S.Treasury bonds currently are worth $28,387,500. If Treasury bond futures prices are currently 89-00/32^nds, what is the value of the Treasury bond futures hedge position? A)$30,000,000. B)$28,387,500. C)$26,700,000. D)$89,000,000. E)$890,000.

Question

Quizplus · Accepted Answer

The value of the Treasury bond futures hedge position can be calculated by multiplying the notional value of the futures contract (which is $100,000) by the futures price. In this case, the futures price is 89-00/32, which is equivalent to 89.00 + 0.00/32 = 89.00. So, the value of the Treasury bond futures hedge position is $100,000 x 89.00 x 30 = $26,700,000. This value represents the amount that Conyers Bank would gain or lose from the futures position, depending on how the value of the U.S. Treasury bonds changes.

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