Sandra Kapple asks Maria VanHusen about using futures contracts to protect the value of the Star Hospital Pension Plans bond portfolio if interest rates rise VanHusen states a Selling a bond futures contract will generate positive cash flow in a rising interest rate environment prior to the maturit...

a Accurate Futures contracts are marked to the market daily Holding a short position on a bond futur ...

Sandra Kapple asks Maria VanHusen about using futures contracts to protect the value of the Star Hospital

Question:

Sandra Kapple asks Maria VanHusen about using futures contracts to protect the value of the Star Hospital Pension Plan’s bond if interest rates rise. VanHusen states:
a. “Selling a bond futures contract will generate positive cash flow in a rising interest rate environment prior to the of the futures contract.”
b. “The cost of carry causes bond futures contracts to trade for a higher price than the spot price of the underlying bond prior to the of the futures contract.” Comment on the accuracy of each of VanHusen’s two statements.

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...