From the perspective of determining profit and loss, the long futures position most closely resembles a levered investment in a ________.
C)short stock position
D)long stock position
Interest rate swaps involve the exchange of ________.
A)fixed rate bonds for floating rate bonds
B)floating rate bonds for fixed rate bonds
C)net interest payments and an actual principal swap
D)net interest payments based on notional principal, but no exchange of principal
You purchase an interest rate futures contract that has an initial margin requirement of 15% and a futures price of $115 098. The contract has a $100 000 underlying par value bond. If the futures price falls to $108 000 you will experience a ________ per cent loss on your money invested.
You own a $15 million bond portfolio with a modified duration of 11 years and you want to limit your risk but institutional constraints prohibit trading the bond portfolio. T-bond futures are available with a modified duration of the deliverable instrument of 8 years. The futures are priced at $105 000. The proper hedge ratio to use is ________.