SECTION 4.2 AT EXPIRATION, AT-THE-MONEY CALL OPTIONS MOVE VERY RAPIDLY...

2.) Based on the data in Exhibit 2, modifying the duration of the fixed-income allocation to

its target will require an interest rate swap that has notional principal closest to:

A. $11,030,000.

B. $17,777,000

C. $9,412,000.

Answer = A

“Risk Management Application of Option Strategies,” Don M. Chance