It is November 9th. You are managing a bond portfolio worth $6 million. The duration of the portfolio in 6 months will be 9.5 years. You decide to hedge the exposure of interest rate changes in the next 6 months by using Treasury-bond (T-bond) futures. The June Treasury bond futures price is currently 108-16, and the cheapest-to-deliver bond will have a duration of 7.5 years in June. How should you hedge if using the June T-bond futures contracts?

Question 30 options:

	Long 44 contracts
	Long 70 contracts
	Short 44 contracts
	Short 70 contracts

Question 31 (3 points)

The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $45 or fall to $37. An investor buys put options with a strike price of $39. The risk-free interest rate is 2% per annum with continuous compounding. What is the value of each option, using the one-step binomial tree model?

Question 31 options:

	$0.93
	$1.03
	$1.93
	$2.33

Question 32 (3 points)

Six-month call options with strike prices of $35 and $40 cost $6 and $3, respectively. When a bull spread is created by trading a total of 2 call options, under what range of final stock prices will the trader have a net gain?

Question 32 options:

	When the final stock price is below $37
	When the final stock price is above $40
	When the final stock price is above $37
	When the final stock price is above $38

Question 33 (3 points)

A call option on a stock has a delta of 0.3. A trader has bought 1,000 options. What position should the trader take to hedge the position?

Question 33 options:

	Buy 300 shares
	Sell 300 shares
	Buy 700 shares
	Sell 700 shares