You are the manager of a bond portfolio of $10 million face value of bonds worth $9,448,456.

Question:

You are the manager of a bond of $10 million of bonds worth $9,448,456. The has a yield of 12.25 percent and a duration of 8.33. You plan to liquidate the in six months and are concerned about an increase in interest rates that would produce a loss on the You would like to lower its duration to 5 years. A T-bond futures contract with the appropriate expiration is priced at 72 3/32 with a of $100,000, an implied yield of 12 percent, and an implied duration of 8.43 years.
a. Should you buy or sell futures? How many contracts should you use?
b. In six months, the has fallen in value to $8,952,597. The futures price is 68 16/32. Determine the profit from the transaction? Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... 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...