June Klein, CFA, manages a $200 million (market value) U.S. government bond portfolio for a large institution. Klein anticipates a small, parallel shift in the yield curve of 10 basis points and wants to fully hedge the portfolio against any such change. Klein would like to use the T-bond futures contract to implement the hedge. She tabulates some essential information about her portfolio and the corresponding futures contract. The results are shown in Table 1. Table 1: Portfolio and Treasury Bond Futures Contract Characteristics Value of Portfolio: $100,000,000 Duration of Portfolio: 8.88438 Mar-00 Futures: 94.15625 Settlement Date: 02/17/00 Final Delivery Date: 03/31/00 First Delivery Date: 03/01/00 Klein is not as comfortable with the T-bond futures contract as she would like to be. Consequently, she decides to familiarize herself with the characteristics of the futures contract and its associated delivery process.She collects all of the deliverable bonds for the futures contract. This information is shown in Table 2. Klein will test her understanding using the highlighted bond in Table 2. The price value of a basis point (PVBP) are per 1 million par value. Table 2: Treasury Bonds Deliverable for T-Bond Futures Contract Coupon Maturity or first call date Price (flat) Accrued interest YTM/YTC PVBP per million par Duration Conversion factor Cost of delivery 10.000% 11/15/15 133 24/32 2.5824 6.534% 1211.2284 1.1759 23.0331 Klein’s broker supplies the characteristics of the Treasury bond that is currently the cheapest-to-deliver bond. These are shown in Table 3. Table 3: Cheapest-to-Deliver Treasury Bond Coupon Maturity or first call date Price (flat) Accrued interest YTM/YTC PVBP $ per million par Duration Conversion factor Cost of delivery 13.250% 11/15/17 135.4375 3.4217 9.166% 1110.0814 7.99429 1.4899 -4.8502 Klein wants to compute the interest rate sensitivity of the highlighted bond in Table 2. She assumes that the yield increases by one basis point. How much, per $1 million par position, will the value of this bond change (to the nearest dollar)? A) -$12. B) $121,123. C) -$1,211. D) -$121,123. Using the information in Table 2, Klein would like to compute the duration of the highlighted bond. Which is the closest to Klein’s answer? A) 9.06. B) 10.54. C) 8.88. D) 12.11. Klein would like to quantify the approximate value loss of her portfolio from an increase in yields according to her expectations. Using the information in Table 1 which of the following is the closest to Klein’s answer? A) -$1,211,228. B) -$888,438. C) -$8,884. D) $8,884.
This table is difficult to interpret because of the lack of lines / separator Can someone break out the details please? Coupon Maturity or first call date Price (flat) Accrued interest YTM/YTC PVBP $ per million par Duration Conversion factor Cost of delivery 10.000% 11/15/15 133 24/32 2.5824 6.534% 1211.2284 1.1759 23.0331
shameless bounce – maratikus – can u lay out the above question a little better, so it’s easier to read? or else, if it’s a Schweser QBank question – please provide the QBank ID. Thanks CP