Vince, a Speculator, Expects Interest Rates to Increase and Purchases

question 23

Multiple Choice

Vince, a speculator, expects interest rates to increase and purchases a put option on Treasury bond futures with an exercise price of 95-32. The premium paid for the put option is 2-36. Just prior to the expiration date, the price of the Treasury bond futures contract is valued at 93-22. Vince exercises the option and closes out the position by purchasing an identical futures contract. Vince's net gain from this speculative strategy is $____.

• A)- 406.25
• B)4,718.75
• C)- 4,718.75
• D)- 812.50
• E)None of these are correct.

Understand the concept of agency relationships and the roles of principals and agents.

Recognize the fiduciary duties agents owe to principals and the consequences of breaching these duties.

Identify different forms of agency and the conditions under which each is established.

Grasp the legal responsibilities and rights of both agents and principals within an agency relationship.

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Definitions:

31st Payment

The payment made as the thirty-first installment in a series of payments or financial obligations.

Amortized

The process of spreading out a loan into a series of fixed payments over time, which covers both the principal and the interest.

Compounded Monthly

Interest calculation strategy where interest is added to the principal sum every month, allowing the investment to grow at a faster pace.

Amortized

The process of gradually paying off debt through a series of fixed payments that include both interest and a portion of the principal.