In Late January 2011,Starlight Corporation Is Considering the Sale of $50

question 42

Multiple Choice

In late January 2011,Starlight Corporation is considering the sale of $50 million in 10-year debentures rated AAA.The issue will most likely be registered and sold some time in April.Therefore,Starlight Corporation desires to hedge the pending issue using Treasury bond futures contracts each representing $100,000.Explain how you would go about hedging the bond issue?

• A) Sell 500 contracts
• B) Buy 500 contracts
• C) Sell 50 contracts
• D) Buy 50 contracts
• E) None of the above

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