Should the bank go long or short on futures contracts

Assignment Help Financial Management

Reference no: EM131888747

Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 116 − 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000.

a. Should the bank go long or short on the futures contracts?

Long

Short

b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 116 − 210. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Net profit $

c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 115 − 270. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Net profit $

Reference no: EM131888747

Questions Cloud

The world of corporate finance is becoming more global : Increasingly, the world of corporate finance is becoming more global. How do these contrast with the factors faced when making only domestic investments?

Calculate annual incremental operating cash flows : Calculate the project's initial investment costs, annual incremental operating cash flows, and terminal cash flows. What are project's NPV and IRR?

Identify all omb requirements for a breach notification plan : Identify all OMB requirements for a breach notification plan, along with an example of actions that could be taken to comply with the requirement.

Translating writing skills to oral presentations : "Translating Writing Skills to Oral Presentations" Please respond to the following:

Should the bank go long or short on futures contracts : Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, Should the bank go long or short on the futures contracts?

Explain the different types of conflict : Watch Black Mirror (A Netflix show). Watch the drama, and explain three conflicts found in the episode, what type of conflict (from the 5 above).

Correlate to a daily and weekly schedule : How does an online learning environment correlate to a daily and weekly schedule? Do you think it is harder to schedule for something

Write a formal legal brief on a cybersecurity case : Write a formal legal brief on a cybersecurity case, United States v. Nosal.

Embodiment of enlightenment thinking : In what ways is Benjamin Franklin an embodiment of enlightenment thinking?

User Account

All Pages