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You believe interest rates are about to rise. Consequently, you are considering short selling $16 million in face value of a bond with a MD
You believe interest rates are about to rise. Consequently, you are considering short selling $16 million in face value of a bond with a MD of 11.2 priced at 96.33. As an alternative, you are considering buying/selling ED futures. (a) If you decide to trade ED Futures, would you buy or sell futures? (b) How many futures would you trade such that the futures position will have the same level of profits and losses as the bond trade? (Assume a parallel shift in rates and a short time horizon. Round your answer to the nearest integer.) You believe interest rates are about to rise. Consequently, you are considering short selling $16 million in face value of a bond with a MD of 11.2 priced at 96.33. As an alternative, you are considering buying/selling ED futures. (a) If you decide to trade ED Futures, would you buy or sell futures? (b) How many futures would you trade such that the futures position will have the same level of profits and losses as the bond trade? (Assume a parallel shift in rates and a short time horizon. Round your answer to the nearest integer.)
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