USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 114

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A three-month T-bond futures contract (maturity 20 years, coupon 6 percent, face $100,000) currently trades at $98,781.25 (implied yield 6.11 percent) . A three-month T-note futures contract (maturity 10 years, coupon 6 percent, face $100,000) currently trades at $101,468.80 (implied yield 5.80%) . Assume semiannual compounding.
-Refer to Exhibit 15.4. Suppose the yield curve changed so the that the new yield on the T-bond contract rose to 6.5 percent, and the new yield on the T-note contract fell to 5.5 percent. Calculate the profit on the note against bond futures spread. (Assume coupons are paid semiannually)

• A) -$5850.92
• B) -$6,671.42
• C) $6,671.42
• D) $5850.92
• E) $4550.42

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Definitions:

Selective Optimization

A strategy that involves focusing on and improving one's strengths while compensating for weaknesses, often used in the context of aging and development.

Compensation

Payment or reward typically given in exchange for services rendered or as reparation for loss.

Vowel Sounds

The sounds produced without any significant constriction or blockage of air flow in the vocal tract, fundamental to speech.

Fast Mapping

A cognitive process by which children are able to learn new words or concepts with minimal exposure, rapidly associating them with their meanings.