Dudley Savings Bank wishes to take a position in Treasury bond futures contracs, which currently have a quote of 113-100. Dudly Savings thinks interest rates will go down over the period of the investment. The face value of the bond underlyting the futures contract is $100,000.
A) Should the bank go Long or short on the futures contract?
B) Given your answer to part (a) calculate the net profit to Dudley Savings Bank if the price of futures contracts increases to 113-220.
C) Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 112-280.