How many dollars of the futures contract do you need

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Problem: Your $10M bond portfolio has a yield of 4%; a weighted average maturity of 7 years, and a weighted average modified duration of 5 years. You wish to hedge the interest rate risk by shorting a long-term bond futures contact with a 20-year modified duration. How many dollars of the future's contract do you need to short to hedge out most of your interest rate risk?

Reference no: EM133665282

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