At the end of September 201X, investor Paul has a $25 million bond portfolio that he can only sell in two months. He wants to protect his portfolio against interest rate risk by November 30, 201X. In the following table, we provide you with the spot market and futures market quotes for interest rates per $100 of nominal value: Spot market Futures market September 30, 201X 80 78 November 30, 201X 76 73.7 Change 4 4.3

has. Indicate the change in interest rates between September 30 and November 30, 201X.

b. Specify the strategy that the investor must adopt on the futures market in order to adequately hedge his bond portfolio.

c. Explain and calculate the results obtained in the spot market and the futures market.

d. Explain the net result obtained by the investor as well as the reason for the imperfection of the hedging carried out by the investor Paul.