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Interest Rate Futures

Boone Securities buys a $100,000 par value, June Treasury bond contract on Chicago Board of option trading at 106 14/32.

A. What is the dollar value of the contract?

B. There is an initial margin requirement of $2,565 and a margin maintenance requirement of $1,900. If an interest rate increase causes the bond contract to go down by 0.9 percent of par value, will Boone be called on to put up more margins?

C. If an interest rate decrease causes the bond contract to go up by 0.7 percent of par value, what will be the percent return on margin?

Solution Preview

Boone Securities buys a $100,000 par value, June Treasury bond contract on Chicago Board of option trading at 106 14/32.

A. What is the dollar value of the contract?

=106 14/32= 106.4375
Thus a $100 par value will have a dollar value of $106.4375
Thus, $100,000 par value will have a dollar value of $106,437.50

Answer: ...

Solution Summary

The solution answers questions related to interest rate futures. Initial margin requirements are determined.

$2.19