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6. Today is March 31, and corporation RPK plans to issue $450 million in 30-year bonds on May 15th. These bonds are priced at par

6. Today is March 31, and corporation RPK plans to issue $450 million in 30-year bonds on May 15th. These bonds are priced at par and have a modified duration of 15. RPK wants to hedge their interest rate risk using June T-bond futures contracts which have a price of 95 3/32 and a modified duration of 10. Show the following:

  • How would RPK hedge in this situation using T-bond futures contracts? (Be specific)
    • Show the net loss/gain if on May 15 the bond price is 96.22 and the June T-bond futures price is 92 6/32, Round to 4 decimals

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