A financial intermediarys balance sheet is such that DA= 5, DL = 3. This FI...
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Finance
A financial intermediarys balance sheet is such that DA= 5, DL = 3. This FI has $300 million in assets and net worth (equity) of $50 million. Suppose that the FI has futures contracts available on 10-year US Treasuries. These bonds have a duration of 8.17, pay a coupon of 4%, and are priced to yield 6% and sell for $0.851 per $1. The minimum contract size is $100,000. How many contracts are required to fully hedge the interest? should they buy or sell?
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