Brad, a Speculator, Expects Interest Rates to Increase and Purchases

question 60

Multiple Choice

Brad, 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.Brad exercises the option and closes out the position by purchasing an identical futures contract.Brad's net gain from this speculative strategy is $____.

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

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Definitions:

Heritable

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Phenylketonuria

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L-DOPA

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A progressive neurological disorder that affects movement, causing symptoms such as tremors, stiffness, and slow movement.