A mutual fund plans to purchase $ 500,000 of 30-year Treasury bonds in four months. These bonds
Question:
a. If interest rate changes in the spot market exactly match those in the futures market, what type of futures position should the mutual fund create?
b. How many contracts should be used?
c. If the implied rate on the deliverable bond in the futures market moves 12 percent more than the change in the discounted spot rate, how many futures contracts should be used to hedge the portfolio?
d. What causes futures contracts to have a different price sensitivity than the assets in the spot markets?
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Related Book For
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett
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