Conyers Bank Holds Treasury Bonds with a Book Value of $30

question 213

Multiple Choice

Conyers Bank holds Treasury bonds with a book value of $30 million. However, the Treasury bonds currently are worth $28,387,500. The portfolio manager for Conyers Bank wishes to sell the entire issue of Treasury bonds at a current price of 87-05/32^nds. What will be the gain or loss on the cash position since the futures contract was placed? (That is, since the bonds were valued at $28,387,500.)

• A)Loss of $3,834,375.
• B)Loss of $3,853,125.
• C)Gain of $2,240,625.
• D)Gain of $3,853,125.
• E)Loss of $2,240,625.

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Definitions:

Average Variable Cost

The total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Marginal Product

The extra output generated from the inclusion of one additional unit of a particular input while maintaining all other inputs unchanged.

Variable Cost

Costs that change in proportion to the level of production output or activity level of an entity.

Average Variable Costs

Average variable costs represent the per-unit variable costs of production, calculated by dividing total variable costs by the quantity of output.