Exhibit 21 -Refer to Exhibit 21

question 53

Multiple Choice

Exhibit 21.12
Use the Information Below for the Following Problem(S)
Suppose you are a loan officer for a commercial bank and one of your clients has just approached you about a one-year loan for $4,000,000. Interest on the new loan will be paid at the end of each quarter based on the prevailing level of LIBOR at the beginning of each quarter. The LIBOR yield curve in the cash market is as follows:
$\begin{array}{ll}90 \text {-day LIBOR } & 2.70 \% \\180 \text {-day LIBOR } & 2.85 \% \\270 \text {-day LIBOR } & 3.10 \% \\360 \text {-day LIBOR } & 3.40 \%\end{array}$
-Refer to Exhibit 21.12.A bond portfolio manager expects a cash inflow of $10,000,000.The manager plans to hedge potential risk with a Treasury futures contract with a value of $102,150.The conversion factor between the CTD and the bond specified in the Treasury futures contract is 0.88.The duration of bond portfolio is 6 years,and the duration of the CTD bond is 4.5 years.Indicate the number of contracts required and whether the position to be taken is short or long.

• A) 114 contracts short
• B) 114 contracts long
• C) 60 contract short
• D) 60 contracts long
• E) None of the above

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Definitions:

Plasma Membrane

A bi-layer of lipids and proteins that surrounds a cell, controlling the movement of substances in and out of the cell.

Electrons

Negatively charged subatomic particles that orbit the nucleus of an atom.

Electron Transport Chain

A sequence of structures that move electrons from donors to acceptors through oxidation-reduction processes, simultaneously facilitating the movement of hydrogen ions across a membrane.

Final Electron Acceptor

A compound that receives or accepts electrons during the electron transport chain, facilitating oxidative phosphorylation in cellular respiration.