Now It Is 2 July 2011 A Fund Manager Has Managed A Hk 50 Million Bond Portfolio (1)

“Now it is 2 July 2011. A fund manager has managed a HK$50 million bond portfolio. After studying the economic fundamentals, he is confident that interest rates are expected to be higher in the next 12 months. The fund manager decides to short 3-year EFN futures contracts to hedge the value of the bond portfolio. The quoted price for the June 2012 EFN futures contract is 112.5.Determine the contract price of the June 2012 EFN futures contract and the number of 3-year EFN futures contracts needed to execute the hedging.

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