The Average Duration of the Loans Is 10 Years If the Current (Spot)rate for One-Year British Pound Futures Is

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $\begin{array}{llr}\text { Consumer loans } & \$ 50 \text { million Deposits } & \$ 235 \text { million } \\\text { Commercial Loans } & \$ 200 \text { million Equity } & \$ 15 \text { million } \\\text { Total Assets } & \$ 250 \text { million Total Liabilities \& Equity } & \$ 250 \text { million }\end{array}$

If the current (spot) rate for one-year British pound futures is currently at $1.58/ $\le$ and each contract size is $\le$ 62,500,how many contracts are required to be purchased or sold in order to fully hedge against the pound exposure? (Assume no basis risk) .

A) Sell 1,600 BP futures.
B) Buy 1,600 BP futures.
C) Sell 1,712 BP futures.
D) Buy 2,560 BP futures.
E) Buy 1,712 BP futures.