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Question
Conyers Bank holds U.S. Treasury bonds with a book value of $30 million. However, the U.S. Treasury bonds currently are worth $28,387,500.
The portfolio manager for Conyers Bank wishes to sell the entire issue of Treasury bonds at a current price of 87-05/32nds. What will be the gain or loss on the cash position since the futures contract was placed? (That is, since the bonds were valued at $28,387,500.)
A. Loss of $3,834,375.
B. Loss of $3,853,125.
C. Gain of $2,240,625.
D. Gain of $3,853,125.
E. Loss of $2,240,625.
Answer
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