A thrift is planning to buy treasury securities

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Reference no: EM131048258

1. A thrift is planning to buy Treasury securities next month. To hedge the risk, should it buy or sell futures contracts? Explain

2. The portfolio you manage is holding $5 million of treasury bonds with a 7% coupon rate and 5 years to maturity with a price of $98 (per $100 face value). To hedge the interest-rate risk on these bonds over the coming year, should you buy call or put options?

3. A finance company has rate-sensitive assets of $20 million and rate-sensitive liabilities of $15 million. Should it be an interest-rate swap buyer (and make fixed-rate payments) or seller (and make variable-rate payments? Explain.

Reference no: EM131048258

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