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June Klein, CFA, manages a $100 million (market value) U.S. government bond portfolio for an institution. She anticipates a small parallel shift in the yield curve and wants to fully hedge the portfolio against any such change.

Portfolio U.S Treasury bond futures contract - 10 year/ 8 years - $100,000 $75.32 Not applicable 1 - $100,000,000 94-05

a. Discuss two reasons for using futures rather than selling bonds to hedge a bond portfolio. No calculations required.

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