If you purchase a $100,000 interest-rate futures contract for 110,and the price of the Treasury securities on the expiration date is 106,your ________ is ________.
A)profit;$4000
B)loss;$4000
C)profit;$6000
D)loss;$6000

Question

Quizplus · Accepted Answer

When the price of the Treasury securities on the expiration date is 106, the futures contract would have decreased in value. The difference between the purchase price and the expiration price is 110-106 = 4. Since each point in an interest-rate futures contract represents $1,000, the total loss would be 4 points x $1,000/point x 1 contract = $4,000. Therefore, the correct answer is B, loss of $4,000.

If You Purchase a $100,000 Interest-Rate Futures Contract for 110,and