on January 1 the listed spot and futures prices of a treasury bond were 93-8 and
ID: 2764251 • Letter: O
Question
on January 1 the listed spot and futures prices of a treasury bond were 93-8 and 93-13. you purchased $100,000 par value treasury bonds and sold the one treasury bond futures contract. one month later the listed spot price and futures prices were 94 and 94-09, respectively. if you were to liquidate your position, what would be your profits? on January 1 the listed spot and futures prices of a treasury bond were 93-8 and 93-13. you purchased $100,000 par value treasury bonds and sold the one treasury bond futures contract. one month later the listed spot price and futures prices were 94 and 94-09, respectively. if you were to liquidate your position, what would be your profits? on January 1 the listed spot and futures prices of a treasury bond were 93-8 and 93-13. you purchased $100,000 par value treasury bonds and sold the one treasury bond futures contract. one month later the listed spot price and futures prices were 94 and 94-09, respectively. if you were to liquidate your position, what would be your profits?Explanation / Answer
Jan-1
Spot=93.8
Future=93.13
Bought Spot and sell future of Notional $100,000
Profit=100,000*[(Spot 1 months later-93.8)+(93.13- future price 1 month later)]
Profit=100000*(94-93.8+93.13-94.09)= -76,000
Thus I will have loss of $76,000, if i liquidate my position 1 months later
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