In Your Portfolio You Have $1 Million of 20-Year, 8

Multiple Choice

In your portfolio you have $1 million of 20-year, 8 5/8 percent bonds that are selling at 83.15 (or 83 15/32) against this position. Because you feel interest rates will rise, you sell 10 bond futures at 81.15 (or 81 15/32) against this position. Two months later, you decide to close your position. The bonds have fallen to 78, and the futures contracts are at 75.16 (75 16/32) . Disregarding margin and transaction costs, what is your gain or loss?

A) $5,000 loss
B) $500 loss
C) breakeven
D) $500 gain
E) $5,000 gain