You manage a $100 million bond portfolio with a duration of 9 years. You wish to hedge

Question:

You manage a $100 million bond portfolio with a duration of 9 years. You wish to hedge this portfolio against interest rate risk using T-bond futures with a contract size of $100,000 and a duration of 12 years. How many contracts are required?

a. 750

b. 1,000

c. 133

d. 1,333.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals Of Investments Valuation And Management

ISBN: 9781266824012

10th Edition

Authors: Bradford Jordan, Thomas Miller, Steve Dolvin

See More Books

Question Posted: Dec 31, 2023 11:02 AM

See More Questions

Leticia has to hedge the interest rate risk of her holdings of $6,480,000 in Treasury bonds by buying or selling futures contracts. Determine the type of transaction and the price of each contract if...
United Millers purchases corn to make cornflakes. When the price of corn increases, the cost of making cereal increases, resulting in lower profits. Historically, profits per quarter have been...
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
On March 19, Modern Kitchens, a retail store, received Credit Memorandum 244 for $4,290 from J & M Appliance Corporation. The credit memorandum covered a return of damaged trash compactors originally...
The financial statements of Eagle Sport Supply are shown in Table 29.15. For simplicity, ?Costs? include interest. Assume that Eagle?s assets are proportional to its sales. a. Find Eagle?s required...
What are the two data processing approaches used in modern systems?
Explain the difference between consent and informed consent.
On July 1, 2012, Ryhn Co. pays $12,400 to Craig Insurance Co. for a 2-year insurance contract. Both companies have fiscal years ending December 31. For Ryhn Co., journalize and post the entry on July...
QS 12-4 (Static) Indirect: Computing cash flows from operations LO P2 Cain Incorporated reports net income of $15,000. Its comparative balance sheet shows the following changes: accounts receivable...
Which of the following is not an input needed to calculate the number of stock index futures contracts required to hedge a stock portfolio? a. The value of the stock portfolio b. The beta of the...
You manage a $100 million stock portfolio with a beta of .8. Given a contract size of $100,000 for a stock index futures contract, how many contracts are needed to hedge your portfolio? Assume the...
LLAP Company manufactures a specialized hoverboard. LLAP began 2017 with an inventory of 240 hoverboards. During the year, it produced 1,200 boards and sold 1,300 for $800 each. Fixed production...
Assume IBM market quote 189.78 - 189.99 and last price is $189.78. Refer to matrix below to answer this question, to construct a June 190 and June 175 bear put spread. Show all calculations. June...
Figure I shows a JSP program output of a simple registration form. Your program will prompt a user to insert his/her information and click submit, the submitted data should be stored in a Database....
Rather than using to see the waveform of current or voltage in the scope, an rms meter can be used along with a digital display. Look in the help window for the RMS bock and drag it to your file. O...
The impulse responses of four linear-phase FIR filters h [n], h [n], h3 [n], and h [n] are given below. h [n] = -6[n] -0.58[n 1] +8[n-2] - 8[n-4] +0.58[n - 5] + [n-6] h [n] = 0.48 [n] -0.38 [n 1]...
1. Create a Graph Win frame with title Rectangle Area, Perimeter and Diagonal and size 320 by 240 pixels. 2. Set the coordinates of the graphical frame to be (0,0) in the lower left corner and...
Should a retail firm include the cost of receiving and stocking goods when computing inventory values?
Suppose the government bond described in problem 1 above is held for five years and then the savings institution acquiring the bond decides to sell it at a price of $940. Can you figure out the...
Deluxe Tire Company produces tires in two processing departmentsFabrication and Packaging. Transactions for the month of July are shown as follows. 1. Direct materials totaling $15,000 are...
Southwest Corporation uses the weighted average method for its process costing system. The Assembly department at Southwest began the month of April with 6,000 units in work-in-process inventory, all...
Refer to Exercise 28. Prepare a production cost report for Southwest Corporation for the month of April using the format shown in Figure 4.9. In Exercise 28 Southwest Corporation uses the weighted...
What distinguishes an aggregate subquery from a non - aggregate subquery?
Which type of science seeks to expand knowledge regardless of the short - term application of that knowledge?
How can construction feedback impact employees performance in the context of perf management?

You manage a $100 million bond portfolio with a duration of 9 years. You wish to hedge

Question:

Step by Step Answer:

To calculate the number of Tbond futures contracts re...View the full answer

Fundamentals Of Investments Valuation And Management

Students also viewed these Business questions