Assume that a futures contract on Treasury bonds with a face value of $100,000 is purchased at 93-00. If the same contract is later sold at 94-18, what is the gain, ignoring transaction costs?

Question

Quizplus · Accepted Answer

The gain is calculated based on the difference between the selling and buying prices. The notation used in bond markets is in 32nds of a point, so the purchase price is 93 points (or percent of face value), and the selling price is 94 points plus 18/32 of a point. The difference is 1 point and 18/32 of a point, or 1.5625 points. Since each point represents 1% of the face value, the gain is 1.5625% of $100,000, which equals $1,562.50.

Assume That a Futures Contract on Treasury Bonds with a Face