USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 94

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Assume you are the Treasurer for the Johnson Pharmaceutical Company and in late July 2004, the company is considering the sale of $500 million in 20-year bonds that will most likely be rated the same as the firm's other debt issues. The firm would like to proceed at the current rate of 8.5%, but you know that it will probably take until November to bring the issue to market. Therefore, you suggest that the firm hedge the pending issue using Treasury bond futures contracts, which each represent $100,000.

-Refer to Exhibit 15.2. How you would go about hedging the bond issue?

• A) buy 5,000 contracts
• B) buy 50,000 contracts
• C) sell 5,000,000 contracts
• D) sell 5,000 contracts
• E) sell 500 contracts

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Definitions:

Muscle Relaxation

Muscle relaxation is a technique that involves systematic tensing and relaxing of muscle groups to reduce physical stress and enhance relaxation.

Body Scanning

A mindfulness practice that involves paying attention to parts of the body and bodily sensations in a gradual sequence from head to toe.

Attitudinal Foundations

The underlying beliefs and attitudes that shape an individual's behavior and interpretation of the world.

Meditation

A practice of focused concentration, often for the purpose of achieving a mentally clear and emotionally calm state.