If T-bond futures prices decrease to 81-27/32^nds, what is the value of the futures hedge position? A)$81,270,000. B)$24,553,125. C)$26,700,000. D)$812,700. E)$28,387,500.

Question

Quizplus · Accepted Answer

To calculate the value of the futures hedge position, we need to use the following formula:

Value of the futures hedge position = (Futures price - Initial futures price) x Contract size x Number of contracts

Here, the initial futures price is not given, so we assume it to be 100-00. Therefore, the decrease in price is 100-00 - 81-27/32 = 18-03/32.

The contract size of T-bond futures is $100,000, and let's assume the number of contracts is 25.

So, the value of the futures hedge position is:
(18-03/32 x $100,000 x 25) = $24,553,125

Therefore, the best choice is B.

If T-Bond Futures Prices Decrease to 81-27/32nds, What Is the Value

If T-Bond Futures Prices Decrease to 81-27/32^nds, What Is the Value