For this specific question, on zero-coupon T-bonds, the current yield to maturity, with ten years to maturity, is valued at a total of seven percent. This put option contract has a strike price that is equal to the current price of the t-bonds, with a face value, of $200,000. This option contract has a premium at the amount of $4,000.

a) Calculate the amount of put option contracts that should be purchased, so that if the interest rates were to rise a total of one percent, the net would equal $100 million, from the contracts.

b) Day zero: In this situation, simulate that you have purchased the put options and that the current futures price is equal to the strike price on the options. To begin a dynamic hedge, how many futures contracts should you buy?