Write a paper answering the following two questions:

• By what amount will the market value of a Treasury bond futures contract change if interest rates rise from 5% to 5.25%? The underlying Treasury bond has a duration of 10.48 years, and the Treasury bond futures contract is currently being quoted at 113-06. (Remember that Treasury bonds are quoted in 32nds.) Include all calculations, descriptions of their significance and essay explanation of what these calculations mean.

• Morning View National Bank reports that its assets have a duration of 7 years, and its liabilities average 1.75 years in duration. To hedge this duration gap, management plans to employ Treasury bond futures, which are currently quoted at 112-170 and have a duration of 10.36 years. Morning View’s latest financial report shows total assets of $100 million and liabilities of $88 million. Approximately how many futures contracts will the bank need to cover its overall exposure? Include all calculations, descriptions of their significance and essay explanation of what these calculations mean.

Include all detailed calculations

1300-1500 words not including title or references

4 scholarly sources-2 peer reviewed