Today a firm has finalized plans to issue $135,000,000 total face value of bonds on November 18th. The bonds will carry a coupon rate of 7.35%, mature in 25 years and it is expected they can be issued at face value. The duration of the bonds is 9.63. They have decide to hedge the interest rate risk of the issue with the December Treasury Bond futures contract (size of contract is $100,000). The December futures price today is 110-15 (the price is quoted as a percent of face value in 32nds). The futures are tracking a bond with a yield of 6.04% and a duration of 10.27. State the size and type of futures transaction necessary to hedge the interest rate risk associated with this issue. If on November 18th the firm issues the bonds at a market yield of 7.85% and the Dec. futures contract is closed at a price of 103-21, what is the net hedged proceeds from the issue?
(Hint: the unhedged proceeds from the bond issue are the value of the bonds at the market yield)