Multiple Choice
The average duration of the loans is 10 years. The average duration of the deposits is 3 years. ![The average duration of the loans is 10 years. The average duration of the deposits is 3 years. What is the gain or loss on the futures position using T-Bonds (Duration = 9 years, $96 per $100 face value) if the shock to interest rates is 1 percent [i.e. ΔR/(1 + R) = 0.01 and ΔR<sub>f</sub>/(1 + R<sub>f</sub>) = 0.011]? A) $16,320,960 loss. B) $16,312,320 gain. C) $15,552,750 gain. D) $15,552,750 loss. E) $13,252,250 gain.](https://d2lvgg3v3hfg70.cloudfront.net/TB2400/11ea6441_1843_a723_9252_af342e1cdfe1_TB2400_00.jpg)
What is the gain or loss on the futures position using T-Bonds (Duration = 9 years, $96 per $100 face value) if the shock to interest rates is 1 percent [i.e. ΔR/(1 + R) = 0.01 and ΔRf/(1 + Rf) = 0.011]?
A) $16,320,960 loss.
B) $16,312,320 gain.
C) $15,552,750 gain.
D) $15,552,750 loss.
E) $13,252,250 gain.
Correct Answer:
Verified
Correct Answer:
Verified
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