Go to the CME Group website and look up conversion factors for Treasury bond futures. Explain the pattern. Why is there no conversion factor that is greater than 1? What would have to be true for the conversion factor to be exactly 1?

Suppose you are a bond portfolio manager and you decide to use Treasury bond futures to hedge your portfolio over the upcoming three months. Your portfolio is worth $500 million. It will have a duration of 5.0 three months from now. The relevant futures price is 120. The Treasury bond that is expected to be cheapest-to-deliver will have a duration of 8.0 on the maturity date of the futures contract. What position in futures contracts do you require to put the hedge in place? If after six weeks, the bond that is expected to be cheapest-to-deliver changes to one with a duration of 9.0, what adjustments need to be made to the hedge? If all interest rates decrease over the three months, but long-term rates come down by more than medium- and short-term rates, how will this impact the performance of the hedge?