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:

Esophageal Tumor

An abnormal growth of cells in the esophagus, which can be benign or malignant (cancerous).

Esophageal Varices

Swollen, varicose veins located in the lining of the lower esophagus, often a complication of liver disease and can lead to life-threatening bleeding.

Failure To Thrive

A condition often seen in children, characterized by slower physical development and growth than normal for their age.

Broken Nose

A fracture of the bones of the nose, typically resulting from trauma, leading to pain, swelling, and sometimes difficulty breathing.