Bill Baher, a private investor, purchased a futures contract on Treasury bonds at a price of 102-12. Two months later, Baher sells the same futures contract in order to close out the position.Atthat time, the futures contract specifies 103-15. What is Baher's nominal profit? The par value of the futures contract is $100,000.

Question

Quizplus · Accepted Answer

To calculate Baher's profit or loss, we need to determine the price difference between the purchase price and the selling price of the futures contract.

Purchase price = 102-12 = 102.375% of par value = $102,375
Selling price = 103-15 = 103.469% of par value = $103,469

Profit = Selling price - Purchase price = $103,469 - $102,375 = $1,093.75

Since Baher made a profit, we can eliminate choices B and D. Additionally, since Baher's nominal profit is greater than $1,000, we can eliminate choice A. Therefore, the correct answer is C, $1,093.75 profit.

Bill Baher, a Private Investor, Purchased a Futures Contract on Treasury