Question

Questions 4 to 10 refer to the following information. Conyers Bank holds U.S. Treasury bonds with a book value of $30 million and a duration of 11.25 years. The U.S. Treasury bonds are currently worth $28,387,500 and yield 12%. The Bank is currently considering hedging the risk relating to these Treasury bonds by using Treasury bond futures. Treasury bond futures are currently priced at 94.20 and have a $100,000 par value. What would be the impact on the price per US Treasury bond futures if the interest rate increases by 25 basis points? Recall: Treasury Notes and Bonds are quoted at 32nds of a dollar. A: $2,365.51 increase B: $2,376.19 decrease C: $2,365.51 decrease D: $2,376.19 increase E: No impact

          Questions 4 to 10 refer to the following information. Conyers Bank holds U.S. Treasury bonds with a book value of $30 million and a duration of 11.25 years. The U.S. Treasury bonds are currently worth $28,387,500 and yield 12%. The Bank is currently considering hedging the risk relating to these Treasury bonds by using Treasury bond futures. Treasury bond futures are currently priced at 94.20 and have a $100,000 par value. What would be the impact on the price per US Treasury bond futures if the interest rate increases by 25 basis points? Recall: Treasury Notes and Bonds are quoted at 32nds of a dollar.

A: $2,365.51 increase
B: $2,376.19 decrease
C: $2,365.51 decrease
D: $2,376.19 increase
E: No impact

Added by Thomas N.

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