Assignment 1: Portfolio revisions using bond futures contracts.

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Statement of the Problem

1. Consider the following original portfolio and revise it with bond futures contracts.

Stock 4,000,000

Bonds 4,000,000

Cash 4, 000 000

Total 12,000,000

Revise the above portfolio with bond futures contracts using Treasury bonds futures that are priced at 162-20. You decide to go long 12 Treasury bond futures contracts.

Treasury bond futures contracts are based on $100,000 par value. Show full calculation and show your revised portfolio including dollar values and percentages.