Suppose a CBOT 10-year U.S.Treasury note futures contract has a quoted price of 88-30.If annual interest rates go down by 1.00 percentage point,what is the gain or loss on the futures contract? (Assume a $1,000 par value,round the new interest rate to 4 decimal places when written as a decimal,and round the change in price up to the nearest whole dollar.)
A)$63.00
B)$65.00
C)$67.00
D)$69.00
E)$71.00

Question

Quizplus · Accepted Answer

When interest rates decrease, the price of the bond increases. The quoted price of 88-30 translates to 88.9375% of par value. A 1% decrease in interest rates typically results in a price increase of approximately 9% for a 10-year Treasury note. Therefore, the gain is approximately 9% of $1,000, which is $90. The nearest whole dollar change in price is $67.

Suppose a CBOT 10-Year U