Calgary Bank and Trust has $100 million in assets and $83 million in liabilities. The...
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Calgary Bank and Trust has $100 million in assets and $83 million in liabilities. The duration of the assets is 5.4 years, and the duration of the liabilities is 1.6 years. How many futures contracts does this bank need to fully hedge itself against interest-rate risk? The available Canada bond futures contracts have a duration of 10 years, have a face value of $1,000,000, and are selling for $972,000. The bank needs to purchase futures contracts to fully hedge itself against interest-rate risk. (Round up to the nearest whole number.)
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