On Monday Morning You Sell One June T-Bond Futures Contract

question 10

Multiple Choice

On Monday morning you sell one June T-bond futures contract at 97:27 or for $97,843.75. The contract's face value is $100,000. The initial margin requirement is $2,700 and the maintenance margin requirement is $2,000 per contract. Use the following price data to answer questions 67 through 70.
-If r_f is greater than d then we know that _______________.

• A) the futures price will be higher as contract maturity increases
• B) F₀ < S₀
• C) F_T > S_T
• D) arbitrage profits are possible

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Definitions:

Purchase Discount

is a reduction in the price of goods bought, usually due to early payment by the buyer to the seller.

Perpetual Inventory System

A perpetual inventory system continuously tracks inventory levels and costs, updating records with each receipt or sale of goods.

Physical Inventory

The process of counting by hand the actual inventory that a company holds in its premises, as opposed to counting based on purchase and sale records.

Cost Of Goods Sold

Expenses directly incurred from the manufacturing of a company’s goods for sale, such as materials and labor.