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1.Suppose that the pension you are managing is expecting an inflow of funds of $1 billion next year and you want to make sure you

1.Suppose that the pension you are managing is expecting an inflow of funds of $1 billion next year and you want to make sure you will earn the current interest rate of 5% when you invest the incoming funds in long-term bonds.

a.How would you use the options market to achieve it?

b.How would you use the futures market to achieve it ?

What are the advantages and disadvantages of using a futures contract rather than an option contract?

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