Conyers Bank Holds Treasury Bonds with a Book Value of $30

Multiple Choice

Conyers Bank holds Treasury bonds with a book value of $30 million. However, the Treasury bonds currently are worth $28,387,500. If the portfolio manager put on the hedge when T-bond futures were quoted at 89-00/32^nds, what is the profit/loss on the futures position if the settlement price is 81-27/32^nds?

A) Profit of $2,146,875.
B) Loss of $2,146,875.
C) Profit of $1,270,000.
D) Loss of $1,270,000.
E) Loss of $812,700.