A Bank with Total Assets of $271 Million and Equity

Multiple Choice

A bank with total assets of $271 million and equity of $31 million has a leverage adjusted duration gap of +0.21 years. Use the following quotation from the Wall Street Journal to construct an at-the-money futures option hedge of the bank's duration gap position. If 91-day Treasury bill rates increase from 3.75 percent to 4.75 percent, what will be the profit/loss per contract on the bank's futures option hedge?

A) A loss of $556.10 per put option contract.
B) A profit of $556.10 per put option contract.
C) A loss of $1,971.84 per call option contract.
D) A profit of $1,971.84 per call option contract.
E) A profit of $2,528 per put option contract.