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Question 7 (10 points) An investor has a nominal amount of $50,000,000 in a bullet Bond A whose gross price (in % of the face
Question 7 (10 points) An investor has a nominal amount of $50,000,000 in a bullet Bond A whose gross price (in % of the face value) and modified duration are respectively 92.971 and 7.56. We consider a futures contract on a coupon bond whose characteristics are the following: Contract size: $100,000; Gross price (in % of the face value) and modified duration of the cheapest-to-deliver: 107.625 and 7.61 respectively; Conversion factor: 1.5312. Additionally, assume that if the yield of bond A changes by 25 basis points, the yield of cheapest-to-deliver issue changes by 70 basis points. What is the number of futures contracts that the investor has to sell? Question 7 (10 points) An investor has a nominal amount of $50,000,000 in a bullet Bond A whose gross price (in % of the face value) and modified duration are respectively 92.971 and 7.56. We consider a futures contract on a coupon bond whose characteristics are the following: Contract size: $100,000; Gross price (in % of the face value) and modified duration of the cheapest-to-deliver: 107.625 and 7.61 respectively; Conversion factor: 1.5312. Additionally, assume that if the yield of bond A changes by 25 basis points, the yield of cheapest-to-deliver issue changes by 70 basis points. What is the number of futures contracts that the investor has to sell
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