If you sell twenty-five $100,000 futures contracts to hedge holdings of a Treasury security,the value of the Treasury securities you are holding is
A)$250,000.
B)$1,000,000.
C)$2,500,000.
D)$5,000,000.

Question

Quizplus · Accepted Answer

Each futures contract is worth $100,000, so selling 25 contracts means you are hedging a total value of 25 x $100,000 = $2,500,000.

If You Sell Twenty-Five $100,000 Futures Contracts to Hedge Holdings