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IIL. Currently (March 20, 2021), your portfolio consists of 1,000 Treasury 1 3/4% September 15, 2030 bonds. If you are bearish, believing that the 10-year Treasury yield would rise by 100 basis points (from the current market yield of 2%) in the next three months, what would you do to hedge against the rising interest rates with June 2021 10-year T-note futures (symbol: ZN) whose current market price is 124? If indeed three months from now the 10-year Treasury yield rises by 100 basis points, describe in detail how your futures position would protect the market value of your portfolio. If not, (the 10-year yield declined by 100 basis points) what is the result of your hedging strategy?

IIL. Currently (March 20, 2021), your portfolio consists of 1,000 Treasury 1 3/4% September 15, 2030 bonds. If you are bearish, believing that the 10-year Treasury yield would rise by 100 basis points (from the current market yield of 2%) in the next three months, what would you do to hedge against the rising interest rates with June 2021 10-year T-note futures (symbol: ZN) whose current market price is 124? If indeed three months from now the 10-year Treasury yield rises by 100 basis points, describe in detail how your futures position would protect the market value of your portfolio. If not, (the 10-year yield declined by 100 basis points) what is the result of your hedging strategy?

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
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II. Assume that now is June 1, 2021, and that you are looking at the U.S. equity market with a special interest in the stock of General Motors Company. Discuss whether you would or would not want to buy the GM stock by examining any six of the company's many financial ratios. Hint: Go to Google search and download the three financial statements of GM for recent years (eg, 2016 to 2020) to quantify and comment on the six selected ratios. There is no right or wrong answer for your decision, only the future can tell. But you need to explain the reasoning behind your "buy" or "not buy" decision by illustrating the significance, the pros, and the cons of your six selected ratios. II. Currently (March 20, 2021), your portfolio consists of 1,000 Treasury 1 3/4% September 15, 2030 bonds. If you are bearish, believing that the 10-year Treasury yield would rise by 100 basis points (from the current market yield of 2%) in the next three months, what would you do to hedge against the rising interest rates with June 2021 10-year T-note futures (symbol: ZN) whose current market price is 124? If indeed three months from now the 10-year Treasury yield rises by 100 basis points, describe in detail how your futures position would protect the market value of your portfolio. If not, (the 10-year yield declined by 100 basis points) what is the result of your hedging strategy?
Transcribed Image Text:II. Assume that now is June 1, 2021, and that you are looking at the U.S. equity market with a special interest in the stock of General Motors Company. Discuss whether you would or would not want to buy the GM stock by examining any six of the company's many financial ratios. Hint: Go to Google search and download the three financial statements of GM for recent years (eg, 2016 to 2020) to quantify and comment on the six selected ratios. There is no right or wrong answer for your decision, only the future can tell. But you need to explain the reasoning behind your "buy" or "not buy" decision by illustrating the significance, the pros, and the cons of your six selected ratios. II. Currently (March 20, 2021), your portfolio consists of 1,000 Treasury 1 3/4% September 15, 2030 bonds. If you are bearish, believing that the 10-year Treasury yield would rise by 100 basis points (from the current market yield of 2%) in the next three months, what would you do to hedge against the rising interest rates with June 2021 10-year T-note futures (symbol: ZN) whose current market price is 124? If indeed three months from now the 10-year Treasury yield rises by 100 basis points, describe in detail how your futures position would protect the market value of your portfolio. If not, (the 10-year yield declined by 100 basis points) what is the result of your hedging strategy?
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