Problem

31. If we wish to hedge a bond that pays a cash-flow of 2 million after six months and ano...

31. If we wish to hedge a bond that pays a cash-flow of 2 million after six months and another cash-flow of 102 million after twelve months, suggest a hedging scheme using eurodollar futures contracts. Assume that the bond is priced on a semiannual compounding basis and has a current yield to maturity of 4% per annum.

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Solutions For Problems in Chapter 6