Question 1 5 Points An Fl has a duration of assets of 10 years and duration of liabilities of 15 years. Total assets of this Fl is $10 mil while total liabilities is $9 mil. What is the number of T-bond futures contracts necessary to hedge the balance sheet if the duration of the deliverable bonds is 0.5 years and the current price of the futures contract is $97000/contract and if basis risk shows that for every 1 percent shock to interest rates, i.e., AR/(1 + R) = 0.01, the implied rate on the deliverable bonds in the futures market increases by 1.1 percent, i.e., ARf/(1 + Rf) = 0.011?? A 40 contracts B 10 contracts C) 656 contracts D) 722 contracts Question 2 5 Points An Fl has a duration of assets of 10 years and duration of liabilities of 15 years. Total assets of this Fl is $10 mil while total liabilities is $9 mil. What is the FI's interest rate risk exposure and how can it use financial futures to hedge that risk exposure? A The Fl can hedge its exposure to interest rate decreases by selling future contracts B) The Fl can hedge its exposure to interest rate decreases by buying future contracts C The Fl can hedge its exposure to interest rate increases by buying future contracts D The Fl can hedge its exposure to interest rate increases by selling future contracts