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6. Consider the following balance sheet: Assets: 950 (10 years = modified duration) Liabilities: 860 in borrowed funds (2 years modified duration) 90 in Equity
6. Consider the following balance sheet: Assets: 950 (10 years = modified duration) Liabilities: 860 in borrowed funds (2 years modified duration) 90 in Equity Show how to hedge this balance sheet against a 1% increase in interest rates using Treasury bond futures assuming that the underlying bond has a modified duration of 9 years. a) Long 864 million b) Short 864 million c) Short 927 million d) Long 927 million e) Long 746 million
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