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

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Should the bank go long or short on the futures

Tree Row Bank wishes to take a position in Treasury bond futures contracts, which currently have a quote of 95’04. Tree Row thinks interest rates will go up over the period of investment. Assume the par value is $100.

a. Should the bank go long or short on the futures contracts?

b. Calculate the net profit to Tree Row Bank if the price of the futures contracts decreases to 94’28.

c. Calculate the net profit to Tree Row Bank if the price of the futures contracts increases to 95’21.

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

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