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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Definitions:

Affect

The emotional component of an attitude.

ABC Model

A theory within cognitive behavioral therapy that outlines the connection between beliefs (B) and consequences (C), highlighting that it is not an activating event (A) that causes emotional and behavioral responses, but rather one's interpretation of the event.

Physiological Indicators

Measures or signs that reflect the body's physical state, such as heart rate, hormone levels, and blood pressure, often used in assessing health or responses to various conditions.

Direct Experience

A method of gaining knowledge through firsthand, personal experience rather than through secondhand information.