After conducting a rate-sensitive analysis, a bank finds itself with the following amounts of rate-sensitive assets and liabilities (RSAs and RSL) and fixed-rate assets and liabilities (FRAs and FRLs); the rate of return and cost rates on the accounts are also given:

Assets	Amount (million $)					Liabilities & Equity	Amount (million $)
RSAs @ 4.25%		$	322			RSLs @ 3.11%		$	200
FRAs @ 5.15%		$	700			FRLs @ 4.95%		$	800
NEA		$	120			Equity		$	142
Total		$	1,142			Total		$	1,142

If we were to design a macrohedge, which of the following positions would help reduce the bank's interest rate risk?

1. I. Long position in bond futures contracts
2. II. Buying put options on bonds
3. III. Purchasing an interest rate cap

Multiple Choice

• I only

• II only

• III only

• I and III only

• II and III only