1. Standard Bank has assets of $150 million, liabilities of $135 million and equity of $15 million. Its asset duration is six years and the duration of the liabilities is four years. Standard Bank wishes to hedge the balance sheet with 20-year T-bond futures contracts, which are currently trading at $95 per $100 face value and duration of 10.37 years. Note that T-bond futures are sold in $100 000 face value per contract.

   If the relationship of the price sensitivity of futures contracts to the price sensitivity of underlying bonds were br = 0.92, how many futures contracts are necessary to fully hedge the bank?

   		521 contracts
   		397 contracts
   		487 contracts
   		384 contracts