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Bank managers is to hedge bank s exposure to increasing interest rates by selling 1 0 June Treasury bond contracts at 1 0 9 -

Bank managers is to hedge bank

s exposure to increasing interest rates by selling

10

June Treasury bond contracts at

109 - 150 .

Assume interest rates do increase, and management offsets its position by buying ten June Treasury bond contracts at

107 - 033 .

Calculate potential gain. What will be the overall return?

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