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A Mortgage Banker Has Forward Contracts to Lend $12 Million

Question 26

Multiple Choice

A mortgage banker has forward contracts to lend $12 million at 4.5 percent for 15 years.What position in Treasury bond futures does this banker need to hedge the interest rate risk?


A) Short position in 12 contracts
B) Short position in 120 contracts
C) Long position in 12 contracts
D) Long position in 120 contracts
E) Long position in 1,200 contracts

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