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
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