Milton Briedman, a Speculator, Expects Interest Rates to Increase and Purchases

question 46

Multiple Choice

Milton Briedman, a speculator, expects interest rates to increase and purchases a put option on Treasury bond futures with an exercise price of 95-32.The premium paid for the put option is 2-36.Just prior to the expiration date, the price of the Treasury bond futures contract is valued at 93-22.Briedman exercises the option and closes out the position by purchasing an identical futures contract.Briedman's net gain from this speculative strategy is $____.

• A)  406.25
• B)4,718.75
• C)  4,718.75
• D)  812.50
• E)none of the above

---

Definitions:

Tibialis Anterior

A muscle in the front part of the lower leg that is involved in dorsiflexion and inversion of the foot.

Gastrocnemius

A major muscle located in the back part of the lower leg, contributing to plantar flexion of the foot.

Soleus

A powerful muscle in the back part of the lower leg (the calf) that helps with walking and standing.

Tibialis Posterior

The tibialis posterior is a muscle in the lower leg involved in stabilizing the ankle and supporting the arch of the foot during movement.