USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 48

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
In late January 2004, The Union Cosmos Company is considering the sale of $100 million in 10-year bonds that will probably be rated AAA like the firm's other bond issues. The firm is anxious to proceed at today's rate of 10.5 percent. As treasurer, you know that it will take until sometime in April to get the issue registered and sold. Therefore, you suggest that the firm hedge the pending issue using Treasury bond futures contracts each representing $100,000.

-Refer to Exhibit 15.1. What is the dollar gain or loss assuming that future conditions described in Case 1 actually occur? (Ignore commissions and margin costs.)

• A) $2,945,000.00 gain
• B) $65,500.00 gain
• C) $2,945,000.00 loss
• D) $65,500.00 loss
• E) $10,500.00 loss

---

Definitions:

System Theory

A theoretical framework that analyzes complex phenomena as systems composed of interrelated parts.

Rules For Conflict

Guidelines or principles designed to manage or resolve disputes in a healthy and constructive manner.

Circular Causality

A concept where events are both cause and effect in a circular pattern, suggesting that causes and effects are not sequential but reciprocal.

Neutral Third Party

An unbiased individual or group involved in conflict resolution who does not favor any disputants and aids in achieving a fair solution.