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What is the number of bond futures contracts to be shorted

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Reference no: EM133002321

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(A) A company has issued bonds with 10 years to maturity, an 7% coupon rate, and $1,000 face value. If your required rate of return is 8% and the bonds pay interest semiannually, what is the value of these bonds? What is the conversion factor for this bond?

(B) Three- month hedge is required for a $8,000,000 portfolio. Duration of the portfolio in 3 months will be 7.8 years. The 3-month T-bond futures price is 94-02 so that contract price is $94,062.50. The duration of cheapest to deliver bond in 3 months is 9.2 years. What is the number of bond futures contracts to be shorted?

(C) An interest rate is 8% per annum with continuous compounding. What is the equivalent rate with quarterly compounding?

Reference no: EM133002321

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