# Futures Contract Problem

An investor buys two gold futures contracts at \$350 per ounce. Each gold futures contract is based on 5,000 ounces of gold. At the same time he collateralizes his position by buying the required amount of 1O-year notes paying 3%. Two months later the price of gold is \$347.40 and the price of the 10-year notes has not changed. What is the net gain or loss on the value of the investor’s position? A. \$8,500 loss. B. \$26,000 loss. C. \$26,000 gain. D. \$34,500 gain.

Damn, never mind… just figure it out as I am typing it… lol

FYI - Loss from future contract: (347.40 - 350.00) * 5000 * 2 = -26,000 Gain from treasuries: 3.500.000 * 0.03 * 60/360 = 17,500 Net = -8,500 Answer: A

hi i dont understand how you got \$3500 from gain from treasuries could you please advise me thanks

please ignore the last post i misread it , value is 2 * 5000* \$350 = 3,500,000

"hi i dont understand how you got 3500 from gain" I think it is meant to be 3.5M = 2 * 350 * 5000 (contract value)