Conyers Bank holds Treasury bonds with a book value of $30 million. However, the 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?

Question

Quizplus · Accepted Answer

To calculate the value of the Treasury bond futures hedge position, we need to calculate the number of contracts needed to hedge the $30 million book value of Treasury bonds.

To do this, we divide the book value by the contract size of the Treasury bond futures, which is $100,000.

30,000,000 / 100,000 = 300 contracts

Now we can calculate the value of the hedge position:

300 contracts x (89-00/32) x $100,000 = $26,700,000

Therefore, the correct answer is choice C.

Conyers Bank Holds Treasury Bonds with a Book Value of $30