A Treasury bond futures contract settles at 103'16.
a. Calculate the present value of one futures contract in dollars?
b. Are current market interest rates higher or lower than the standardized rate on a futures contract? Explain.
c. Calculate 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. Describe differences between forward and futures contracts? Illustrate, using a specific example, of how companies could use either a futures or forward contract to hedge a position.