A Bank with Total Assets of $271 Million and Equity

question 108

Multiple Choice

A bank with total assets of $271 million and equity of $31 million has a leverage adjusted duration gap of +0.21 years. Use the following quotation from the Wall Street Journal to construct an at-the-money futures option hedge of the bank's duration gap position. $$\begin{array}{l}\text { TREASURY BILLS (IMM) -\$1 million; 91-day (\$25.28 ea.) }\\\begin{array} { | c | c | c | } \hline \text { Strike Price } & \text { Calls-Settle } & \text { Puts-Settle } \\\hline 96.00 & 28 \text { basis points } & 63 \text { basis points } \\\hline 96.25 & 19 \text { basis points } & 78 \text { basis points } \\\hline 96.50 & 12 \text { basis points } & 96 \text { basis points } \\\hline\end{array}\end{array}$$ If 91-day Treasury bill rates increase from 3.75 percent to 4.75 percent, what will be the profit/loss per contract on the bank's futures option hedge?

• A)A loss of $556.10 per put option contract.
• B)A profit of $556.10 per put option contract.
• C)A loss of $1,971.84 per call option contract.
• D)A profit of $1,971.84 per call option contract.
• E)A profit of $2,528 per put option contract.

Define and distinguish between sociological terms and concepts.

Appreciate the role of societal norms in shaping behaviors and social phenomena.

Understand the application of sociological approaches and theories to real-world issues.

Comprehend the impact of agency in personal decision-making within the context of broader social influences.

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Definitions:

Elasticities

Indicators that show the sensitivity of the demand or supply of a product to variations in its price, income levels, or other relevant elements.

Elasticity of Demand

A measure of how much the quantity demanded of a good or service changes in response to a change in its price.

Determinant

A factor or element that causes change in an outcome or condition, often used in reference to variables that affect economic indicators.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.