An investor has $50,000 in T-bills wishes to hedge his position. Given the following information, what is the gain or loss on the cash and futures position?
At t = 0, T-bills sell at 96% of par and Futures contract ($1,000) is 96 1/2
At t < t + 1, Interest rates have fallen. T-bills sell at 96 1/4 of par and Futures contract ($1,000) is 96 3/4.