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A life insurance company expects to have $8 million in cash to invest in one year (i.e., on September 15, 2019, assuming today is September

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A life insurance company expects to have $8 million in cash to invest in one year (i.e., on September 15, 2019, assuming today is September 15, 2018). It wants to buy a series of U.S. Treasury Notes, the 5.50% due September 15, 2028 ("T-notes") on September 15, 2019. The current market yield to maturity for these notes is 4.25%. If the insurance company is concerned market interest rates will decrease over the next year (and thereby the price of the bonds would increase), would it make sense for the insurance company to agree on September 15, 2018 to purchase relevant CBT T-note future contracts that settle on September 15, 2019 at a price of $111.152.9974 for each contract (face value is $100,000)? Assume interest payments are made annually. No, because the insurance company would be better off if market interest rates increase over the next year. Yes, because the current contract would lock in a price for the T-notes that would provide the insurance company a yield to maturity comparable to today's yield. Yes, because the current contract would provide the insurance company the ability to earn a higher yield to maturity. No, because the insurance company would be paying too much for the T-notes in the futures contract that would provide a yield to maturity that is lower than today's yield. A life insurance company expects to have $8 million in cash to invest in one year (i.e., on September 15, 2019, assuming today is September 15, 2018). It wants to buy a series of U.S. Treasury Notes, the 5.50% due September 15, 2028 ("T-notes") on September 15, 2019. The current market yield to maturity for these notes is 4.25%. If the insurance company is concerned market interest rates will decrease over the next year (and thereby the price of the bonds would increase), would it make sense for the insurance company to agree on September 15, 2018 to purchase relevant CBT T-note future contracts that settle on September 15, 2019 at a price of $111.152.9974 for each contract (face value is $100,000)? Assume interest payments are made annually. No, because the insurance company would be better off if market interest rates increase over the next year. Yes, because the current contract would lock in a price for the T-notes that would provide the insurance company a yield to maturity comparable to today's yield. Yes, because the current contract would provide the insurance company the ability to earn a higher yield to maturity. No, because the insurance company would be paying too much for the T-notes in the futures contract that would provide a yield to maturity that is lower than today's yield

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