USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 116

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
In late January 2004, The Union Cosmos Company is considering the sale of $100 million in 10-year bonds that will probably be rated AAA like the firm's other bond issues. The firm is anxious to proceed at today's rate of 10.5 percent. As treasurer, you know that it will take until sometime in April to get the issue registered and sold. Therefore, you suggest that the firm hedge the pending issue using Treasury bond futures contracts each representing $100,000.

-Refer to Exhibit 15.1. Explain how you would go about hedging the bond issue?

• A) sell 1,000 contracts
• B) buy 1,000 contracts
• C) sell 100 contracts
• D) sell 10,000 contracts
• E) buy 10,000 contracts

---

Definitions:

Accelerates

To increase in speed or rate of occurrence.

Acute Viral Infection

A rapid onset of disease caused by viruses, characterized by symptoms that can be severe but often short-lived.

Reye's Syndrome

A rare but serious condition that causes swelling in the liver and brain, often associated with the use of aspirin in children.

Upper Respiratory

Pertains to the parts of the respiratory system located above the diaphragm, including the nose, nasal passages, throat, and larynx.