Question

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stion 1
a) Dominion Company purchased a futures contract on Treasury bonds that specified a price of 02-00. When this position was closed out, the price of the Treasury bond futures contract was 93-10. Determine the profit or
b) Jim purchased a futures contract on Treasury bonds at a price of 102-12. Two months later, Jim sells the same futures contract in order to close out the position. At that time, the futures contract specifies 103-15. What i
the futures contract is $100.000.
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Answer 1

The profit or loss for each scenario is:

Dominion Company's Futures Contract: $91.3125

Jim's Futures Contract: $109,375

How did we get the values?

Let's break down the information given for each scenario:

Dominion Company's Futures Contract:

1. Purchase Price: 02-00

2. Selling Price: 93-10

To calculate the profit or loss, we need to convert these prices to a decimal format. In the futures market, prices are quoted in 32nds of a point.

`Purchase\: Price: \(2 + (0)/(32)\) = 2.0000`

`Selling\: Price: \(93 + (10)/(32)\) = 93.3125`

Now, calculate the profit or loss:

`\[ \text{Profit or Loss} = \text{Selling Price} - \text{Purchase Price} \]`

`\[ \text{Profit or Loss} = 93.3125 - 2.0000 \]`

`Profit\: or\: Loss = 91.3125`

Jim's Futures Contract:

1. Purchase Price: 102-12

2. Selling Price: 103-15

Convert these prices to a decimal format:

`Purchase Price: \(102 + (12)/(32)\) = 102.375`

`Selling Price: \(103 + (15)/(32)\) = 103.46875`

Now, calculate the profit or loss:

`\[ \text{Profit or Loss} = (\text{Selling Price} - \text{Purchase Price}) * \text{Contract Size} \]`

`\[ \text{Profit or Loss} = (103.46875 - 102.375) * 100,000 \]`

`Profit\: or\: Loss =109,375`

So, the profit or loss for each scenario is:

Dominion Company's Futures Contract: $91.3125

Jim's Futures Contract: $109,375

Complete question:

Dominion Company purchased a futures contract on Treasury bonds that specified a price of 02-00. When this position was closed out, the price of the Treasury bond futures contract was 93-10. Determine the profit or loss, ignoring transaction costs.

Selling price =

Purchase price =

Profit =

Jim purchased a futures contract on Treasury bonds at a price of 102-12. Two months later, Jim sells the same futures contract in order to close out the position. At that time, the futures contract specifies 103-15. What is the profit or loss, is the futures contract is $100.000.

Show your work to get credit!