Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However,the U.S.Treasury bonds currently are worth $28,387,500.

Assume that the portfolio manager sells the bonds at a price of 87-05/32,and that she closes out the futures hedge position at a price of 81-17/32.What will be the net gain or loss on the entire bond transaction from the time that the hedge was placed?
A)Gain of $2,583,125.
B)Loss of $93,750.
C)Loss of $2,583,125.
D)Gain of $93,750.

Question

Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However,the U.S.Treasury bonds currently are worth $28,387,500.

Assume that the portfolio manager sells the bonds at a price of 87-05/32,and that she closes out the futures hedge position at a price of 81-17/32.What will be the net gain or loss on the entire bond transaction from the time that the hedge was placed?
A)Gain of $2,583,125.
B)Loss of $93,750.
C)Loss of $2,583,125.
D)Gain of $93,750.

Quizplus · Accepted Answer

The Answer of Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However,the U.S.Treasury bonds currently are worth $28,387,500.

Assume that the portfolio manager sells the bonds at a price of 87-05/32,and that she closes out the futures hedge position at a price of 81-17/32.What will be the net gain or loss on the entire bond transaction from the time that the hedge was placed?
A)Gain of $2,583,125.
B)Loss of $93,750.
C)Loss of $2,583,125.
D)Gain of $93,750.

Conyers Bank Holds U