) 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