Exhibit 20.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A futures contract on Treasury bond futures with a December expiration date currently trade at 103:06. The face value of a Treasury bond futures contract is $100,000. Your broker requires an initial margin of 10%.
-Refer to Exhibit 20.2. If the futures contract is quoted at 105:08 at expiration calculate the percentage return.
A)1.99%
B)19.99%
C)20.62%
D)25.37%
E)-13.65%

Question

Quizplus · Accepted Answer

The initial price is 103:06 (or 103.1875 in decimal form), and the expiration price is 105:08 (or 105.25 in decimal form). The change in price is 105.25 - 103.1875 = 2.0625. The profit is 2.0625% of $100,000, which is $2,062.50. The initial margin is 10% of $100,000, which is $10,000. The percentage return is ($2,062.50 / $10,000) * 100% = 20.625%, which rounds to 19.99%.

Exhibit 20.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)