Should the bank go long or short on the futures


Dudley Savings Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 106 − 100. Dudley Savings thinks interest rates will go down over the period of investment. The face value of the bond underlying the futures contract is $100,000. a. Should the bank go long or short on the futures contracts? Long Short b. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts increases to 106 − 210. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Net profit $ c. Given your answer to part (a), calculate the net profit to Dudley Savings Bank if the price of the futures contracts decreases to 105 − 270. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Net profit $

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Financial Management: Should the bank go long or short on the futures
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