Conyers Bank holds Treasury bonds with a book value of $30 million. However, the Treasury bonds currently are worth $28,387,500. If the portfolio manager put on the hedge when T-bond futures were quoted at 89-00/32^nds, what is the profit/loss on the futures position if the settlement price is 81-27/32^nds?

Question

Quizplus · Accepted Answer

The profit on the futures position is calculated by the change in the futures price. The initial price is 89-00/32nds, which is 89. The settlement price is 81-27/32nds, which is 81.84375. The change in price is 89 - 81.84375 = 7.15625. Each point is worth $1,000, so the profit is 7.15625 * $1,000 * 30 = $2,146,875.

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