A fund manager expects to have funds to invest in three months' time and plans to buy $3 million corporate bonds, curren
Posted: Sat Feb 26, 2022 9:05 am
A fund manager expects to have funds to invest in three months'
time and plans to buy $3 million corporate bonds, currently
yielding 7.00% p.a. The manager hedges their interest rate risk
using three-year Treasury bond futures contracts, currently priced
at 93.500.
In three months' time the fund manager buys $2 million corporate
bonds at yield of 6.84% p.a. and closes out their futures market
position at 94.250. What is the profit from closing out the futures
position.
time and plans to buy $3 million corporate bonds, currently
yielding 7.00% p.a. The manager hedges their interest rate risk
using three-year Treasury bond futures contracts, currently priced
at 93.500.
In three months' time the fund manager buys $2 million corporate
bonds at yield of 6.84% p.a. and closes out their futures market
position at 94.250. What is the profit from closing out the futures
position.