18. An FI has a $100 million portfolio of 6-year Eurodollar bonds that have an 8 percent coupon.

The bonds are trading at par and have a duration of five years.

The FI wishes to hedge the portfolio with T-bond options that have a delta of -0.625.

The underlying long-term Treasury bonds for the option have duration of 10.1 years and trade at a market value of $96,157 per $1000,000 of par value.

Each put option has a premium of $3.25 per $100 of face value.

h. Summarize the gain, loss, and cost conditions of the hedge on the bond portfolio in terms of changes in interest rates.