The trustees of a pension fund would like to examine the issue of protecting the bonds

in the fund’s portfolio against an increase in interest rates using options and futures.

Before discussing this with their external bond fund manager, they decide to ask four

consultants about their recommendations as to what should be done at this time. It turns

out that each of them has a different recommendation. Consultant A suggests selling

covered calls, Consultant B suggests doing nothing at all, Consultant C suggests selling

interest rate futures, and Consultant D suggests buying puts. The reason for their different

recommendations is that although all consultants understand the pension fund’s objective

of minimizing risk, they differ with one another in regards to their outlook on future

interest rates. One of the consultants believes interest rates are headed downward, one has

no opinion, one believes that the interest rates would not change much in either direction,

and one believes that the interest rates are headed upward. Based on the consultants’

recommendations, could you identify the outlook of each consultant?