Refer to Problem 12. How does consideration of basis risk change your answers?
a. Compute the number of T-bond futures contracts required to construct a macrohedge if T-bond futures are priced at 96 and the duration of the T- bond underlying the futures contract is 9 years. Also, assume that [∆Rf/(1 + Rf)/∆R/(1 + R)] = br = 0.90.
b. Explain what is meant by br = 0.90.
c. If br = 0.90, what information does this provide on the number of futures contracts needed to construct a macrohedge?