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The current yield to maturity (i) on zero-coupon T- bonds with ten years to maturity (n) is two percent. The strike price on the put option contract is equal to the current price of the T-bonds (P) with a face value (FV) of $100,000. The premium on the option contract is $3,000. a) How many put option contracts should be bought so that, if interest rates rise by one percentage point, the contracts will net $25 million (after subtracting the premium paid for the options)? ROUND EACH BOND PRICE TO THE NEAREST THOUSAND DOLLARS. ROUND THE NUMBER OF CONTRACTS TO THE NEAREST INTEGER. b) Day zero: Assume that you have bought the put options and that the current futures price is equal to the strike price on the options. To begin a dynamic hedge, how many futures contracts should you buy? The current yield to maturity (i) on zero-coupon T- bonds with ten years to maturity (n) is two percent. The strike price on the put option contract is equal to the current price of the T-bonds (P) with a face value (FV) of $100,000. The premium on the option contract is $3,000. a) How many put option contracts should be bought so that, if interest rates rise by one percentage point, the contracts will net $25 million (after subtracting the premium paid for the options)? ROUND EACH BOND PRICE TO THE NEAREST THOUSAND DOLLARS. ROUND THE NUMBER OF CONTRACTS TO THE NEAREST INTEGER. b) Day zero: Assume that you have bought the put options and that the current futures price is equal to the strike price on the options. To begin a dynamic hedge, how many futures contracts should you buy

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