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A bond portfolio is worth $24,000,000 today. The futures price for a Treasury note futures contract is $110,000 and each contract is for the delivery of bonds with a face value of $100,000. On the delivery date the duration of the bond that is expected to be cheapest to deliver is 6 years and the duration of the portfolio will be 5.5 years. How many contracts are necessary for hedging the bond portfolio using price sensitivity hedge ratio (assume continuous compounding)?

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Financial Management, Finance

Category:- Financial Management
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