k ces 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.) Number of contracts
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- If you bought $10 million of each bond at the market price – how many 5-year note futures contracts with a face value of $250K and a market value of 80 and a duration of 4 would you need to buy or sell to hedge the entire portfolio? What is the portfolio duration? Fill out the appropriate boxes of the spreadsheetSuppose you want to hedge a $500 million bond portfolio with a duration of 5.1 years using 10-year Treasury note futures with a duration of 6.7 years, a futures price of 102, and 3 months to expiration. The multiplier on Treasury note futures is $100,000. How many contracts do you buy or sell?The S&P 500 spot price is $4,570. The futures price with 6-months delivery is $4,895. The risk-less rate of return for 6-months is 3.68%. You enter into ONE futures contract to deliver ONE index portfolio in 6-months and receive $4,895. Whatever profit you make, you transfer to today. How much $ profit will you have today? Hint: Borrowing money today and selling risk-less bonds are equivalent actions. Whatever $ profit you may make from the above transactions, you have to bring back to today by borrowing at the risk-less rate. Assume no transactions costs (you can borrow and lend at the risk-less rate etc.).
- You manage a bond portfolio worth $400 million. You wish to hedge your portfolio against rise in interest rates by using T-bond futures that will mature in 9 months. The duration of your bond portfolio is 6 years, the duration of the T-bond is 7 years. The bond futures price is 98,000, (a) What action must you take and how many contracts? (b) Why do you need to use the duration of the bonds to get the answerSuppose that bond ABC is the underlying asset for a futures contract with settlement six months from now. You know the following about bond ABC and the futures contract: (1) In the cash market ABC Is selling for $80 (par value is $100); (2) ABC pays $8 in coupon interest per year in two semiannual payments of $4, and the next semiannual payment is due exactly six months from now; and (3) the current six-month interest rate at which funds can be loaned or borrowed is 6% A. What is the theoretical futures price? B. What action would you take if the futures price is $83?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 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.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 durationYou are a risk analyst in a public pension fund. You have been asked to calculate the appropriate amount of futures to hedge the bond below. What is your calculation? Bond Face: $30,000,000 Term: 10 years Coupon: 2.50% annual coupon YTM: 3% Hedge Futures contract 10 year T-note Denomination $100,000 Deliverable Notes Note 1 Term: 10 years Coupon: 2.2% payable semi annually YTM: 2.8% p.a Note 2 Term: 10 years Coupon: 2.10% payable semi annually YTM: 2.8% p.a Note 3 Term: 10 years Coupon: 2% payable semi annually YTM: 2.8% p.a Bo
- Give typing answer with explanation and conclusion If a bond is issued at the price of $10,000 per contract and promises a 5.7% interest every year, the contact will be redeemed by the issuer at a discount after 8 years for $9,200. If the market is offering a return of 4.8% for similar risk securities, what would be the price you are ready to offer for this bond? Question 4 options: $10,590 $10,040 $10,290 $9,740The promised cash flows of three securities are listed below. If the cash flows are risk-free, and the risk-free interest rate is 5.0%, determine the no-arbitrage price of each security before the first cash flow is paid. Security Cash Flow Today ($) 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.)Assume 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.)