What is the calculation for profit or loss if you sold a futures contract at 105-8 and purchased an offsetting contract when rates increased by 1 percentage point annually?

Bond face value in the future is $100,000

Years to maturity is 20

Interest payments per year 2

Current cost of debt 6%

Semi-annual cost of debt adjustment 3%

Interest amount is $3,000

Translated 105-8 to % is 105.25%

Current value of futures position is $105,250.00

Implied annual yield is 5.5617%

New value of futures contract if interest rates increase by 1 percentage point annually is $93,793.12

Thank you!

Answer rating: 100% (QA)

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