Reference no: EM133110360

Part A) Jason bought a put option on a $100,000 Treasury bond with an exercise price of $105,000 for a premium of $2,000. If on expiration the Treasury bond sells for $110,000, determine Jason´s profits and explain if he will exercise the right to sell the Treasury bond. How would your answer change if the Treasury bond sells for $95,000 on expiration?

Part B) Refer to the previous exercise. Determine Jason´s profits (for both prices on expiration date) if instead of buying a put option on a $100,000 Treasury bond, he sold a $100,000 Treasury bonds futures contract at par.