You Hold a $50 Million Portfolio of Par Value Bonds

question 37

Multiple Choice

You hold a $50 million portfolio of par value bonds with a coupon rate of 10% paid annually and 15 years to maturity.How many T-bond futures contracts do you need to hedge the portfolio against an unanticipated change in the interest rate of 0.18% Assume the market interest rate is 10% and that T-bond futures contracts call for delivery of an 8% coupon (paid annually) , 20-year maturity T-bond.

• A)398 contracts long
• B)524 contracts short
• C)1048 contracts short
• D)398 contracts short

Realize the importance of physical inventory and its impact on financial accuracy.

Understand the significance of inventory costing method choice on financial reports.

Grasp the consequences of inventory mismanagement, including overstocking and understocking.

Comprehend the method of calculating average inventory and its relevance.

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