5.You are long $80 million face value of the 5 1/4 Nov 2028 US Treasury bonds. You would like to minimize your exposure to interest rate changes by setting up a hedge using the Chicago Board of Trade's Treasury bond futures contract.Explain how to set up the right hedge using two different approaches: the DV01 method and the regression method.Make sure your answer is sufficiently unambiguous that a research assistant could execute your instructions and get the right hedge.

a)How do you calculate the hedge ratio to use?

b)How do you determine the number of futures contracts to trade to achieve that hedge ratio?