Assume That the Portfolio Manager Sells the Bonds at a Price

question 23

Multiple Choice

Assume that the portfolio manager sells the bonds at a price of 87-05/32, and that she closes out the futures hedge position at a price of 81-17/32. What will be the net gain or loss on the entire bond transaction from the time that the hedge was placed?

• A)Gain of $2,583,125.
• B)Loss of $93,750.
• C)Loss of $2,583,125.
• D)Gain of $93,750.
• E)Gain of $812,700.

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