As a bond portfolio manager you have the discretion to hedge up to 55% of the US $135 million Corporate bond portfolio for which you are responsible. You have to use a number of hedge structures to ensure the portfolio is protected for each ensuing quarter and then roll the hedge forward. Set up the prospective hedges (at least three option based hedges-collars) using the following prices for the 5 year T-Note (US\$100,000 per contract) and discuss the basis risk (the durations are matched) of your hedges: Sept/21 futures contract at 105:12 (remember priced in 32nds) Try to structure three near zero cost hedges