Suppose the December CBOT treasury bond futures contract has a quoted price of 80-07. If annual interest rates go up by 1 percentage point, what is the gain or loss on the futures contract (assume $1,000 par value)?
A. Loss of $78,
B. Gain of $78,
C. Loss of $145,
D. Gain of $145, or
E. None of the above
Please see attached file
Answer: A. LOSS OF $78,
We are being asked to find the implied interest rate on a Treasury bond futures contract that settled at 80-07? If interest
rates increased by 1 percent, what would be the contract's new value? The difference in these values gives the answer
Settle price on futures contract as quoted = 80 and 7 32nds
Settle price on futures contract (% of par, decimal) = 80.21875%
The gain/loss on CBOT Treasury Bond futures due to a change in interest rate is calculated.