1. Laura, a bond portfolio manager, administers a $10 million portfolio. The portfolio currently has a duration of 8.5 years. Laura wants to shorten the duration to 6 years using T-bill futures. T-bill futures have a duration of 0.25 years and are trading at $975 (face value = $1,000). How is this accomplished?
2. Futures are available on three-month T-bills with a contract size of $1 million. If you take a long position at 96.22 and later sell the contracts at 96.87, how much would the total net gain or loss be on this transaction?
