USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you observe the following prices in the T-Bill and Eurodollar futures markets

-Refer to Exhibit 15.6. Assume that a month later the price of the September T-Bill future is 96.25 and the price of the Eurodollar future is 95.9. Calculate the profit on the T-Bill futures position.
A) 101 basis points
B) 130 basis points
C) -101 basis points
D) -130 basis points
E) 29 basis points

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume that you observe the following prices in the T-Bill and Eurodollar futures markets
 
-Refer to Exhibit 15.6. Assume that a month later the price of the September T-Bill future is 96.25 and the price of the Eurodollar future is 95.9. Calculate the profit on the T-Bill futures position.
A) 101 basis points 
B) 130 basis points 
C) -101 basis points 
D) -130 basis points 
E) 29 basis points

Quizplus · Accepted Answer

To calculate the profit on the T-Bill futures position, we need to determine the change in price from the initial observation to a month later.

Initial price of T-Bill futures = 9800
Price of T-Bill futures a month later = 9625

Change in price = 9800 - 9625 = 175

To convert this change to basis points, we divide it by the initial price and then multiply by 10,000.

Profit in basis points = (175 / 9800) x 10,000 = 1785.7 ≈ 101 basis points

Therefore, the answer is Choice C, which is the only option that matches the calculated profit in basis points.