A portfolio is worth $24,000,000 . The futures price for a Treasury note futures contract is 110 and each contract is for the delivery of bonds with a face value of $100,000
On the delivery date the duration of the bond that is expected to be cheapest to deliver is 6 years and the duration of the portfolio will be 5.5 years. How many contracts are necessary for hedging the portfolio?
A. 100
B. 200
C. 300
D. 400
B
The contract price is 110,000 . The number of contracts is (24,000,000×5.5)/(110,000×6.0)=200
Business
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