USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 69

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A three-month T-bond futures contract (maturity 20 years, coupon 6 percent, face $100,000) currently trades at $98,781.25 (implied yield 6.11 percent) . A three-month T-note futures contract (maturity 10 years, coupon 6 percent, face $100,000) currently trades at $101,468.80 (implied yield 5.80%) . Assume semiannual compounding.
-Refer to Exhibit 15.4. If you expected the yield curve to flatten, the appropriate note against bond futures spread strategy would be

• A) go long the T-bond and short the T-note.
• B) go short the T-bond and long the T-note.
• C) go long the T-bond and long the T-note.
• D) go short the T-bond and short the T-note.
• E) None of these are correct.

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Definitions:

Endoderm

The Endoderm is the innermost layer of cells or tissue of an embryo in early development, which gives rise to the lining of the digestive and respiratory systems.

Ectoderm

The outermost layer of cells in the early embryo from which the nervous system, skin, and other external tissues develop.

Proximodistal Development

A pattern of development where growth starts at the center of the body and moves towards the extremities, observed in the physical development of children.

Fingernails

Keratin-based structures at the tips of the fingers that protect the fingertip and enhance tactile sensation.