2. Hedging. (LO2)

a. An investor currently holding $1 million in long-term Treasury bonds becomes concerned about increasing volatility in interest rates. She decides to hedge her risk by using Treasury bond futures contracts. Should she buy or sell such contracts?

b. The treasurer of a corporation that will be issuing bonds in 3 months also is concerned about interest rate volatility and wants to lock in the price at which he could sell 8% coupon bonds. How would he use Treasury bond futures contracts to hedge his firm's position?