Use the following information for questions 16-18:A portfolio manager plans to use a Treasury bond futures contract to hedge abond portfolio over the next six months. The portfolio is worth $50 millionand will have a duration of 3.0 years in six months. The futures price is 112,and each futures contract is on $100,000 of bonds. The bond that is expectedto be cheapest to deliver will have a duration of 7.0 years at the maturity ofthe futures contract. 1 ptsWhat is the new position if after two months the bond that is expected to becheapest to deliver changes to one with a duration of 6.0 years?O (a) Short 223 contractsO (b) Short 191 contractsOO Short 446 contractsO (d) None of the above

The question is based on the concept of immunization of bond portfolio. A bond portfolio can be…

What is the new position if after two months the bond that is expected to be cheapest to deliver changes to one with a duration of 6.0 years? O (a) Short 223 contracts O (b) Short 191 contracts O (c) Short 446 contracts O (d) None of the above

What is the new position if after two months the bond that is expected to be cheapest to deliver changes to one with a duration of 6.0 years? O (a) Short 223 contracts O (b) Short 191 contracts O (c) Short 446 contracts O (d) None of the above

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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Question

1 pts
What is the new position if after two months the bond that is expected to be
cheapest to deliver changes to one with a duration of 6.0 years?
O (a) Short 223 contracts
O (b) Short 191 contracts
OO Short 446 contracts
O (d) None of the above

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