You short $100 million in market value of 10-year annual-coupon U.S. dollar-denominated World Bank

notes with a duration of 8 years. The current price of 10-year U.S. Treasury strips is $40 per $100

face value. What position in these strips would you take in order to hedge, at least approximately,

the interest rate risk of your World Bank note position? You may assume that changes in yields are

likely to be similar at all maturities. Indicate whether you would long or short, and the face value of

the position. Remember that strips do not pay coupon.