Question: A bond portfolio manager will purchase T - bonds in 2 months. Today, these T-bonds are trading in the spot market for $35,000,000.00; their Duration

A bond portfolio manager will purchase T - bonds in 2 months. Today, these T-bonds are trading in the spot market for $35,000,000.00; their Duration is 12 years; and their yield to maturity is 5%. The manager wishes to hedge the purchase with T-bond futures for MAR 2024 delivery. The MAR 2024 futures market price today is 75 - 00; their duration is 13 years and their yield to maturity is 15.5%.

Calculate the number of T-bond futures to use in the hedge employing the price sensitivity ratio.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

On JUL 17, 2022 a bond portfolio manager, PM, knows that he will purchase T - bonds in 2 months. On JUL 17, 2022, these T-bonds are trading in the spot market for $33,000,000.00; their Duration is 10...

On JUL 17, 2022 a bond portfolio manager, PM, knows that he will purchase T bonds in 2 months. On JUL 17, 2022, these T-bonds are trading in the spot market for $33,000,000.00; their Duration is 10...

Hello my friend please assist me with my discussion Interest Rates Negotiation is a soft skill that might just be one of the most important skills you will ever learn. For this Discussion you will...

Small Business Management Directions: Read the case study Vizio: Disrupting Another Market in Chapter 4 on page 124 of the textbook. Answer the following questions: What challenges does Vizio face as...

You need to use Excel for the calculations (with cells containing formulas) and Word for the Essay questions and the Bloomberg portions. If certain functions in Bloomberg have changed since this exam...

I need help to all the questions in the document attached. I'm trying to study for my final that is 1 day and these are crucial for me. Investment Management 333-693 Final Examination Seat No:...

RSK4805 Assignment 03 Assignment 03 Written Unique number 630057 Assignment due date 18 September 2017 Contribution to year mark 50% Required: Complete the questions and submit your answers in PDF...

1. If a bank has a gap of -$10 million, it can reduce its interest-rate risk by A) paying a fixed rate on $10 million and receiving a floating rate on $10 million. B) paying a floating rate on $10...

Why is it important for us to understand how the global system of financial institutions and markets works? ros57395_ch01.qxd 12/21/04 2:45 PM Page 1 Part 1 The Global Financial System in Perspective...

2. Consider a Markov chain with a finite state space S = {81, 82, 83, 84), modelling four different states that your insurance company can be in at the end of the fiscal year. We refer to s, as state...

Question 1 Gutierrez Company reported net income of $193,400 for 2017. Gutierrez also reported depreciation expense of $45,600 and a loss of $6,000 on disposal of equipment. The comparative balance...

The account that determines the value of a variable annuity is referred to as the: QID: 5 0 0 1 1 3 7 Mark For Review AAccumulation account BAnnuity account CSeparate account DGeneral account

5. Develop a scenario comparing two PH programs and involving the use of a CBA.

5 There is also a need to think from different perspectives and at the different multifunctional, corporate and subsidiary levels. This requires managers to be open-minded, flexible and adaptable.

Whilst delayering and downsizing may be aspects of organizing which are contingent on responding to the needs of economic downturn, shareholders interests and efficiency, they may be less effective...

3 What specific practices, such as autonomous and cross-functional teams, and principles, such as empowerment, are best suited to which cultural contexts? How are these practices (with their...