A U$.$K$.-$based pension fund has a large portfolio of British corporate and government bonds. The market value of the bond portfolio is $70$ million. The modified duration of the portfolio is $10.$An economic consulting firm that provides economic forecasts to the pension fund has advised the fund that the chance of an upward shift in

interest rates in the near term is greater than the market currently perceives. In view of this advice, the pension fund has decided to reduce the modified duration of its bond portfolio to $8$ by using a futures contract that has a money duration of $8,000.$

Question $6(2$ points$)$

Listen

What does the pension fund need to do$?$

$1)$Buy the futures

$2)$ Sell the futures

$3)$ Do nothing