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Green Backs Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 96-240. Green Backs thinks interest rates will go down over the period of investment.
a. Should the bank go long or short on the futures contracts?
b. Given your answer to part (a), calculate the net profit to Tree Row Bank if the price of the futures contracts increases to 99-160.
c. Given your answer to part (a), calculate the net profit to Tree Row Bank if the price of the futures contracts decreases to 94-080.
Please show all work and explanations.
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