Homework Help is Here – Start Your Trial Now!
Business
Finance
Consider a $100 million bond portfolio with duration of 4.0 years in 3 months. The portfolio manager wants to hedge the portfolio over the next 3 months with a bond futures contract. The futures price is 122 and each futures contract is on $0.1 million of bonds. The cheapest to deliver bond is expected to have duration of 9.0 years at futures contract maturity. The manager should (a) buy 1,844 bond futures contracts (b) buy 364 bond futures contracts (c) short bond futures 27 contracts (d) short bond futures 364 contracts (e) short bond futures 1,844 contracts

Consider a $100 million bond portfolio with duration of 4.0 years in 3 months. The portfolio manager wants to hedge the portfolio over the next 3 months with a bond futures contract. The futures price is 122 and each futures contract is on $0.1 million of bonds. The cheapest to deliver bond is expected to have duration of 9.0 years at futures contract maturity. The manager should (a) buy 1,844 bond futures contracts (b) buy 364 bond futures contracts (c) short bond futures 27 contracts (d) short bond futures 364 contracts (e) short bond futures 1,844 contracts

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Consider a $100 million bond portfolio with duration of 4.0 years in 3 months. The portfolio manager wants to hedge the portfolio over the next 3 months with a bond futures contract. The futures price is 122 and each futures contract is on $0.1 million of bonds. The cheapest to deliver bond is expected to have duration of 9.0 years at futures contract maturity. The manager should

(a) buy 1,844 bond futures contracts

(b) buy 364 bond futures contracts

(c) short bond futures 27 contracts

(d) short bond futures 364 contracts

(e) short bond futures 1,844 contracts 1

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

how do you know that the portfolio manager should go short rather than go long?

 

Solution
Bartleby Expert
SEE SOLUTION
Knowledge Booster
Bonds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS