Response to the following problems:
1. What are some of the major differences between futures and forward contracts?
2. In each of the following cases, indicate whether it would be appropriate for an FI to buy or sell a forward contract to hedge the appropriate risk.
a. A commercial bank plans to issue CDs in three months.
b. An insurance company plans to buy bonds in two months.
c. A thrift is going to sell Treasury securities next month.
d. A U.S. bank lends to a French company; the loan is payable in euros.
e. A mutual fund plans to sell its holding of stock in a German company.
f. A finance company has assets with a duration of 6 years and liabilities with a duration of 13 years.