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A Bond Portfolio Manager Expects a Cash Inflow of $12,000,000

question 79

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A bond portfolio manager expects a cash inflow of $12,000,000.The manager plans to hedge potential risk with a Treasury futures contract with a value of $105,215.The conversion factor between the CTD and the bond specified in the Treasury futures contract is 0.85.The duration of bond portfolio is 8 years,and the duration of the CTD bond is 6.5 years.Indicate the number of contracts required and whether the position to be taken is short or long.


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