91-Day Treasury Bill Rates = 9

Multiple Choice

91-day Treasury bill rates = 9.71 percent 91-day Treasury bill futures rates = 9.66 percent
(Reminder: Treasury bill prices are calculated using the following formula:
P = FV × (1 - d_t/360)
Where P = price, FV = face value, d = discount yield, and t = days until maturity.)
Calculate the cash flows on the above futures contract if all interest rates increase by 1.49 percent.(That is, ΔR/(1 + R) = 1.49 percent, and 1 bp = $25.)

A) The long futures position earns a profit of $3,766.39.
B) The short futures position earns a profit of $3,725.00.
C) The long futures position earns a profit of $1.49 million.
D) The short futures position earns a profit of $1.49 million.
E) The short futures position suffers a loss of $3,725.