On DEC 1, 21 a Treasury bond dealer decides to sell $50 million face value of a T-bond. The sale will take place on FEB 2, 22. On DEC 1, 21 this T-bond is trading for $102/$100 face value; its duration is 8yrs and its yield is 11%. Also, the T-bond futures for MAR 2022 delivery is trading for 7313, its duration is 9yrs and they yield 15%.

Use a time table to describe the hedge opened by the T-bond dealer on DEC 1, 21 using the price sensitivity ratio.

DO NOT SOLVE ONLY SOLVE C; A. Suppose that on FEB 2, 22 the T-bond is trading for $97/$100 face value and the T-bond futures for MAR 2022 delivery is trading for 62 07.

DO NOT SOLVE ONLY SOLVE C B. Using the same time table you used in 3.1, show the dealers activities on FEB 2, 22 and the total cash flow with the hedge.

C.ONLY SOLVE THIS ONE:Suppose, instead, that on FEB 2, 22 the T-bond is trading for $105/$100 face value and the T-bond futures for MAR 2022 delivery is trading for 77 - 09.

Using the same time table you used in 3.1, show the dealers activities on FEB 2, 22 and the total cash flow with the hedge.