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    Treasury bond future settles and Exchange rate

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    Problem 3. A Treasury bond futures contract settles at 105-8.

    a. What is the present value of the futures contract?
    b. If the contract settles at 105-8, are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.
    c. What is the implied annual interest rate on the futures contract?
    d. Calculate the new value of the futures contract if interest rates increase by 1 percentage point annually.
    e. Calculate your profit or loss if you sold a futures contract at 105-8 and purchased an offsetting contract when rates increased by 1 percentage point annually.

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    https://brainmass.com/business/foreign-exchange-rates/treasury-bond-future-settles-exchange-rate-131191

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    The solution
    1) calculates the present value of the futures contract
    2) determines whether current market interest rates are higher or lower than the standardized rate on a futures contract
    3) calculates implied annual interest rate on the futures contract
    4) calculates the new value of the futures contract if interest rates increase by 1 percentage point annually
    5) calculate profit or loss in selling a futures contract at 105-8 and purchasing an offsetting contract when rates increase by 1 percentage point annually

    $2.19

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