) TO IMPLEMENT CLIENT F'S REQUEST, ALLISON'S MOST APPROPRIATE COURSE OF ACTION IS TO
6.) To implement Client F's request, Allison's most appropriate course of action is to:
A.
sell U.S. Treasury bond futures contracts and buy S&P 500 Index futures contracts.
B.
buy U.S. Treasury bond futures contracts and buy S&P 500 Index futures contracts.
C.
buy stocks in the S&P 500 Index and sell U.S. Treasury bond futures contracts.
Answer = B
Buying U.S. Treasury bond futures and S&P 500 Index futures creates synthetic bond
position and synthetic stock index fund positions, respectively. Client F is long $10
million in cash, which can be used to fund the purchases.
“Risk Management Applications of Forward and Futures Strategies,” by Don M. Chance