Determine the Optimal Hedge Ratio for Treasury Bonds Worth $1,000,000

question 25

Multiple Choice

Determine the optimal hedge ratio for Treasury bonds worth $1,000,000 with a modified duration of 12.45 if the futures contract has a price of $90,000 and a modified duration of 8.5 years.

• A)16.27
• B)15.93
• C)7.42
• D)11.11
• E)none of the above

---

Definitions:

Pitch

Pitch refers to the perceived frequency of a sound, determining how "high" or "low" it sounds.

Basilar Membrane

A membrane running the length of the cochlea; sound waves cause a deformation of this membrane, bending the hair cells in the cochlea and thus stimulating the auditory receptors.

Place Theory

a theory in the field of hearing that suggests different areas of the cochlea in the inner ear respond to different frequencies of sound, aiding in pitch perception.

Opponent-Process Theory

A theory of color vision that proposes three pairs of color antagonists: red-green, blue-yellow, and white-black. Excitation of neurons sensitive to one member of a pair automatically inhibits neurons sensitive to the other member.