Clarke Company Plans to Satisfy Cash Needs in Nine Months

Clarke Company plans to satisfy cash needs in nine months by selling its Treasury bond holdings for $4 million. However, Clarke is concerned that interest rates might increase over the next threemonths. To hedge against this possibility, Clarke plans to sell Treasury bond futures. Thus, Clarke sells ____ futures contract for a price of 99-12. Assuming that the actual price of the futures contract declines to 97-20, Clarke would make a ____ of $____ from closing out the futures position.

A) 40; profit; $76,800
B) 40; loss; $76,800
C) 50; profit; $70,000
D) 40; profit; $70,000
E) none of the above