The mean change in the daily yields of a 15-year, zero-coupon bond has been five basis points (bp) over the past year with a standard deviation of 15 bp. Use these data and assume that the yield changes are normally distributed.
a. What is the highest yield change expected if a 99 percent confidence limit is required; that is, adverse moves will not occur more than 1 day in 100?
b. What is the highest yield change expected if a 95 percent confidence limit is required?