The price of a bond rises from 98 to par. Even if you do nothing,this would still result in an immediately recognized loss on a ________ on a bond,and a paper gain on a bond ________.

Question

Quizplus · Accepted Answer

A rise in the bond price from below par to par would result in a loss on a short futures contract because the holder of a short position would have been better off selling at the higher price. Conversely, it would result in a gain on a call option because the option to buy at a lower price becomes more valuable as the market price increases.

The Price of a Bond Rises from 98 to Par