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. Assume that the portfolio manager sells the bonds at a price of87-05/32, and that she closes out the futures hedge position at a price of81-17/32. What will be the net gain or loss on the entire bond transaction from the time that the hedge was placed?

A) Gain of $2,583,125.
B) Loss of $93,750.
C) Loss of $2,583,125.
D) Gain of $93,750.
E) Gain of $812,700.