2%. EXHIBIT 2 CORPORATE BOND PORTFOLIO AND INTEREST RATE FUTURES MAR...

2.2%.

Exhibit 2

Corporate Bond Portfolio and

Interest Rate Futures Market Information

Current portfolio duration 8.00

Target portfolio duration 10.00

Duration of cheapest-to-deliver bond 7.60

Conversion factor for cheapest-to-deliver bond 0.85

Price of cheapest-to-deliver bond SCF 103,500

E. Determine whether MacDougal should buy or sell interest rate futures to achieve his

duration objective. Calculate the number of contracts MacDougal should trade. Show

your calculations.

4 minutes (Answer 2-E on page 16)

Page 12 Level III

Answer Question 2-A on This Page