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Consider a $25 million bond portfolio having a modified duration of 7.5. Its manager would like to immunize the portfolio against interest rate risk using

Consider a $25 million bond portfolio having a modified duration of 7.5. Its manager would like to immunize the portfolio against interest rate risk using T-Bond futures. The futures contract price is 110-10 and the cheapest to deliver bond has a modified duration of 10. Determine the appropriate hedging transaction: (and why)

A. Buy 170 US T-Bond futures contracts

B. Sell 170 US T-Bond futures contracts

C. Buy 302 US T-Bond futures contracts

D. Sell 302 US T-Bond futures contracts

E. Buy 750 US T-Bond futures contracts

F. Sell 750 US T-Bond futures contracts

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