20 Consider a MBS portfolio with a value of $12.5 million and an effective modified duration of 3.75 years. The investor wishes to hedge this portfolio against interest-rate risk using a two-year forward contract on the 10-year Treasury bond that has a modified duration of 7.69 years and a forward price of 104-00. If the investor wants to completely eliminate interest-rate risk, what position should she take in the forward contract?

21 Reconsider the information provided in Question 20. If, instead, the investor wants to reduce the portfolio duration to a target of 1.50 years, what position should she take in the forward contract?