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Financial Futures and Interest Rate Options
Part 1
Change in value of the bond
=-10.480 x 113187.500 x 0.00250/ (1.0+0.050)
=-1186205 x 0.00250/1.050
=-1186205×0.002381
=-2824.298 dollars
Part 2
Information from the given question
Total obligations = 88.00 million dollars
Total assets =100.00 million dollars
Future value of the bond = ((170.00/320.00)+112) x 1000 dollars
= (0.53125 + 112) x 1000 dollars
=112.53125 x 1000 dollars
=112531.250 dollars
Period of obligations =1.750 years
Period of futures =10.360 years
Period of assets =7.00 years
Number of future contracts = (7.0 years-(100.00 million dollars/88.00 million dollars x 1.750 years) x ((100.00 million dollars/ (10.360 x 112531.250 dollars)
= (7.0 years-1.988636 years) x (100.00 million dollars/1165823.750 dollars)
=5.011364 x 85.7762
=429.8561 or approximately 430.00 contracts
Maynard, J. (2013). Financial accounting, reporting, and analysis. Oxford: Oxford University Press Wood, F. and Sangster, A. (2005). Frank Wood’s business accounting 1. Harlow, England: FT/Prentice Hall
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