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How many contracts does springer need to hedge against

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Springer County Bank has assets totaling $180 million with a duration of five years, and liabilities totaling $160 million with a duration of two years. Bank management expects interest rates to fall from 9% to 8.25% shortly. A T-bond futures contract is available for hedging. Its duration is 6.5 years, and it is currently priced at 99 5/32.

How many contracts does Springer need to hedge against the expected rate change? Assume each contract has a face value of $1,000,000.

Reference no: EM131129389

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