(b) Describe carefully what action you will take to hedge your interest rate exposure using...
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(b) Describe carefully what action you will take to hedge your interest rate exposure using the December 2022 2-year Treasury-Note futures. Show all calculations and be judicious in your selection of a hedging model and appropriate futures maturity. (Assume that the underlying instrument for the 2-year T-note futures is a 6%, 2-year T-note with a $200,000 face value.)
(c) Repeat part (b), but assume instead you decide to hedge with the Dec 2022 5- year T-Note futures. (Assume that the underlying instrument for the 5-year T-note futures is a 6%, 5-year T-note with a $100,000 face value.)
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