Assume a Corporation Is Receiving a Large Amount of Funds

Assume a corporation is receiving a large amount of funds in the near future. The company plans to use the funds to purchase municipal bonds. Also assume that the company is concerned that interest rates will decrease before the purchase date, which would make the municipal bonds more expensive. In order to hedge against this possibility, the company should ____ MBI futures contracts. If interest rates decrease, the futures contract will generate a ____.

A) sell; loss
B) purchase; gain
C) purchase; loss
D) sell; gain
E) none of the above