6.You are the treasury manager of a bank and you know that the bank will need to borrow.$15 million for 3 months in two months time.Interest rates are currently 6.8% and the current quoted price for bank accepted bills futures contracts expiring in 3 months is 92.4.(Assume 30 days each month,365 days in a year,and futures contracts have a standard $1 million face value) (a)Today,what position would you take in the futures market to hedge this risk? Enter"1"for buy/long futures contracts or "2" for sell/short futures contracts (b)After two months,interest rates fall to 6.55% and the quoted price for bank-accepted bills futures contracts is 92.9. What is the profit or loss on the futures market?(for a loss enter a negative number) $ (round your answer to two decimal places) What is the profit or loss on the physical market?(for a loss enter a negative number) $ (round your answer to two decimal places) (c)Was this a perfect hedge? Enter"1"for yes and "2"for no

To hedge against a loan of CCU 100 million that the firm wishes to take three months from now, its CFO is like to use the futures market. Place the following actions in the correct sequence in order to help him hedge the risk: (a) Borrow CCU 100 million in the spot market three months from now; (b) Sell CCU 100 million in the futures market now; (c) Buy CCU 100 million in the futures market three months from now. a-->c-->b c-->b-->a b-->a-->c a-->b-->c

A fund manager manages a portfolio of two-year bonds with a total market value of $2 million. These bonds carry a 4% p.a. coupon paid semi-annually. Concerned that the volatile fluctuation in the interest rates will affect the market value of her bond portfolio, the fund manager would like to take a position in the three-year New Zealand Government Stock futures contract (TYS) at a price of 92.00 (or 9200 implying an 8% p.a. yield-to-maturity) to hedge the interest rate risk. The asset underlying this TYS contract is three-year government stock with $100,000 face value, 8% p.a. coupon, paid semi-annually. Assume that the yield curve is flat at 8% (semi-annual compounding), that is, yields for all maturities are % and that the duration of TYS contract is 2.726 years when yields are 8% p.a.. The duration of the two-year bonds is (1.74/2.12/1.94/2)years and the bond manager needs to (short/long) the TYS contract for hedging the risk of interest rate (rise/drop). The duration-based optimal number of TYS contracts for hedging the interest rate risk for the bond portfolio is ? . Note: Please provide your answer as a positive number with two decimal points in the format of xx.xx (for example, if the answer is 12.345, type in 12.35).

Which of the following is TRUE? To hedge a natural short position with futures, the hedger should: a. Initially sell the futures contract and then buy the same contract at the delivery date. b. Initially buy the futures contract and then sell the same contract before the delivery date. c. Initially buy the futures contract and then sell the same contract after the delivery date. d. Initially buy the futures contract and then sell the same contract at the delivery date.

In futures markets investors who expect to purchase future bonds may hedge against the effects of falling interest rates by:Question 8Select one:a.taking an arbitrage position on bond futures contracts.b.buying bond futures contracts.c.selling bond futures contracts.d.buying and selling similar bond futures contracts.

A French MNC wants to lock in the cost of borrowing on a 9-month USD 45 million loan to be taken out in 3 months’ time by using Eurodollar futures contracts. How many Eurodollar futures contracts in total will be sold by the French MNC in order to hedge its cost of borrowing?Question 10Answera.135b.1c.9d.145e.None of the options in this question are correct.