22-111 How Would Your Results to Question 109 Change If $\Delta$

question 96

Multiple Choice

22-111 How would your results to question 109 change if basis risk shows that for every 1 percent shock to interest rates,i.e., $\Delta$ R = 0.01 and 1+R =1.10,the implied rate on the deliverable bonds in the futures market increases by 1.1 percent,i.e., $\Delta$ Rf/(1+Rf) = .011?

• A)1,500 contracts.
• B)1,888 contracts.
• C)2,100 contracts.
• D)2,408 contracts.
• E)3,100 contracts.

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Definitions:

Indifference Curves

Graphical representations that illustrate combinations of goods that provide the same level of utility or satisfaction to a consumer.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded for a given period.

Consumer Equilibrium

A state where an individual has allocated their income in a way that maximizes their utility, given the prices of goods and services and their preferences.

Indifference Curves

Graphical representations in microeconomics that show different bundles of goods between which a consumer is indifferent.