Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you have estimated that the yield on 20-year bonds changes by 12 basis points for every 18.9-basis-point move in the yield on 5-year bonds. You hold a $4.5 million portfolio of 5-year maturity bonds with modified duration 4 years and desire to hedge your interest rate exposure with T-bond futures, which currently have modified duration 9 years and sell at Fe = $75. How many futures contracts should you sell? (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Number of future contracts

Yields on short-term bonds tend to be more volatile than yields on long-term bonds. Suppose that you have estimated that the yield on 20-year bonds changes by 12 basis points for every 18.9-basis-point move in the yield on 5-year bonds. You hold a $4.5 million portfolio of 5-year maturity bonds with modified duration 4 years and desire to hedge your interest rate exposure with T-bond futures, which currently have modified duration 9 years and sell at Fe = $75. How many futures contracts should you sell? (Do not round intermediate calculations. Round your final answer to the nearest whole number.) Number of future contracts

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 19P

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