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1. Suppose you buy a call option on a $100,000 Treasury bond futures contract with an exercise price of $98,000 for a premium of $500. If on expiration the price of the futures contract is $98,500, what is your profit or loss on the contract?

2. Suppose you buy a put option on a $100,000 Treasury bond futures contract with an exercise price of $102,500 for a premium of $2000. If on expiration the futures contract has a price of $100,000, what is your profit or loss on the contract?

3. Suppose that the pension fund you are managing is expecting an inflow of funds of $10 million next year and you want to make sure that you will earn the current interest rate of 6% when you invest the incoming funds in long-term bonds. How would you use the futures market to do this?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92360120

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