Question: 2 0 . A corporation plans to issue $ 1 0 million of 1 0 - year bonds in 3 months. At the current yields,

20 .

A corporation plans to issue $

10

million of

10 -

year bonds in

3

months. At the current yields, the bonds would have modified duration of

8

years. The T

-

note futures contract is selling at F

0 100

and has modified duration of

6

years. How can the firm use this futures contract to hedge the risk surrounding the yield at which it will be able to sell its bond? Both bond and contract are at par value

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