Assume That a T-Bill Futures Contract with a Face Value

question 34

Multiple Choice

Assume that a T-bill futures contract with a face value of $1 million is purchased at a price of $95.00 per $100 face value. At settlement, the price of T-bills is $95.50. What is the differencebetween the selling and purchase price of the futures contract?

• A) $.50
• B) $50
• C) $500
• D) $5,000
• E) none of the above

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Definitions:

NAV

Net Asset Value, representing the per-share/unit price of a fund on a specific date or time, calculated by deducting liabilities from assets and dividing by the number of shares outstanding.

Load

A fee or charge assessed when buying or selling shares in a mutual fund, which can be front-end (when buying) or back-end (when selling).

Asset Allocation Funds

Mutual funds that invest in a mixed proportion of assets (e.g., stocks, bonds, real estate) to diversify risk.

Balanced Funds

Mutual funds that invest in a mix of asset classes, usually stocks and bonds, aiming to reduce risk through diversification.