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A bank wishes to hedge its $ 5 5 million face value bond portfolio ( currently priced at 9 8 percent of par ) .
A bank wishes to hedge its $ million face value bond portfolio currently priced at percent of par The bond portfolio has a duration of years. It will hedge with Tbond futures face priced at percent of par. The duration of the Tbonds to be delivered in the Tbond futures is years. Calculate the number of futures contracts needed to hedge the interest rate risk of the bank's bond portfolio. Ignore basis risk.
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