If a financial institution expects that the market value of its municipal bonds will decline because of economic conditions, it could hedge its position by ____ futures contracts on ____.

Question

Quizplus · Accepted Answer

The financial institution expects the market value of its municipal bonds to decline due to economic conditions, so it could hedge its position by selling futures contracts on a Municipal Bond Index. This way, if the market value of municipal bonds declines, the institution would make a profit from the futures contracts.

If a Financial Institution Expects That the Market Value of Its