1. How would your answer for part (b) in problem 17 change if the relationship of the...
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1. How would your answer for part
(b) in problem 17 change if the relationship of the price sensitivity of futures contracts to the price sensitivity of underlying bonds were br 0.92?
A mutual fund plans to purchase $500,000 of 30-year Treasury bonds in four months. These bonds have a duration of 12 years and are priced at 96–08
(32nds). The mutual fund is concerned about interest rates changing over the next four months and is considering a hedge with T-bond futures contracts that mature in six months. The T-bond futures contracts are selling for 98–24
(32nds) and have a duration of 8.5 years.
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Financial Institutions Management A Risk Management Approach
ISBN: 9780077211332
6th Edition
Authors: Anthony Saunders, Marcia Cornett
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