Suppose you want to hedge a $430 million bond portfolio with a duration of 8.8 years using 10-year Treasury note futures with a duration of 6.7 years, a futures price of 107, and 97 days to expiration. The multiplier on Treasury note futures is $100,000. How many contracts do you buy or sell? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
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- Suppose that you purchase a Treasury bond futures contract at $95 per $100 of face value. What is your obligation when you purchase this futures contract? If an FI purchases this contract, in what kind of hedge is it engaged? Assume that the Treasury bond futures price falls to 94. What is your loss or gain? Assume that the Treasury bond futures price rises to 97. Mark your position to market.Consider a bond with semiannual interest payments that has a Settlement Date of 8/15/2020, a Maturity Date of 2/15/2031, a Coupon Rate of 5.00%, a Market Price of $975, a Face Value of $1,000, and a Required Return of 5.35%. What is the Macaulay Duration using the Duration function on these bonds expressed as a decimal calculated to two decimal places if you purchase them at the current market price? For example, if your answer is 12.345 then enter as 12.35 in the answerThe promised cash flows of three securities are listed below. If the cash flows are risk-free, and the risk-free interest rate is 5.0%, determine the no-arbitrage price of each security before the first cash flow is paid. Security Cash Flow Today ($) Cash Flow in One Year ($) A 800 800 B 0 1600 C 1,600 0 The no-arbitrage price of security A is how much? ? (Round to the nearest cent.) The no-arbitrage price of security B is how much? ? (Round to the nearest cent.) The no-arbitrage price of security C is how much? ? (Round to the nearest cent.)
- A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 6.20 percent, and the bond has a yield to maturity of 5.71 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) Macaulay duration Modified durationWhat is the Macaulay duration of a 7 percent semiannual coupon bond with two years to maturity and a current price of $1,055.30? (Note: You are required to solve the problem by calculating "Years \times PV / Bond Price" for each cash flow and summing the results. YTM and PV must be calculated using a financial calculator. Round your answer to four decimal places.)You submit a noncompetitive bid in Dec. 2020 to purchase a 28-day RM1,000 Treasury bill, and you find that you are buying the bond for RM999.88722. What are the: a) discount rate % b) investment rate %?
- If the initial speculative margin of a futures contract is $2,000, the maintenance margin is $1,800 and your trading account balance has increased to $2,300, how much must you deposit to comply with your margin requirement?A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.45 percent, and the bond has a yield to maturity of 4.66 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) X Answer is complete but not entirely correct. Macaulay duration Modified duration 12.0670 11.5297Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 6.30% 2 6.90% 3 7.30% 4 7.70% 5 8.00% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? The price is $1894.57. (Round to the nearest cent.)
- A bank wishes to hedge its $30 million face value bond portfolio (currently priced at 99 percent of par). The bond portfollo has a duration of 9.75 years. It will hedge with T-bond futures ($100,000 face) priced at 98 percent of par. The duration of the T-bonds to be delivered is nine years. How many contracts are needed to hedge? Should the contracts be bought or sold? Ignore basis risk.Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?A Treasury bond that settles on October 18, 2022, matures on March 30, 2041. The coupon rate is 6.10 percent, and the bond has a yield to maturity of 5.57 percent. What are the Macaulay duration and modified duration? Note: Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Macaulay duration 11.4179 Modified duration 10.8154 X