Question: 1. Consider the immunization example given in Section 8.4. Assume that the zero-coupon yield curve is flat at y 5 5% and not 8% as

1. Consider the immunization example given in Section 8.4. Assume that the zero-coupon yield curve is flat at y 5 5% and not 8% as in the example. The shifts in the yield curve are parallel.

What positions and how many units of the 6-month bond and the 3-year bond are needed to create an approximate synthetic that will fund the 2-year bond?

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