Exhibit 14-1 Holly Kombs, a Speculator, Expects Interest Rates to Decline in Decline

question 38

Multiple Choice

Exhibit 14-1
Holly Kombs, a speculator, expects interest rates to decline in the near future.Thus, she purchases a call option on interest rate futures with an exercise price of 92-10.The premium on the call option is 2-24.Just before the expiration date, the price of Treasury bond futures is 97-14.At this time, Kombs decides to exercise the option and closes out the position by selling an identical futures contract.
-Refer to Exhibit 14-1.Kombs net gain from this strategy is $____.

• A)  2,687.50
• B)2,687.50
• C)2,375.00
• D)7,437.50
• E)none of the above

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