Question: 1 Define and Explain (30 points) 1. (10 points) What is the mechanism that is used by the Central Bank to reduce the interest rates

1 Define and Explain (30 points) 1. (10 points) What is

1 Define and Explain (30 points) 1. (10 points) What is the mechanism that is used by the Central Bank to reduce the interest rates in the economy? 2. (5 points) What is the difference between a call and a forward to buy a product in terms of the possible payoffs? 3. (5 points) Explain how the modify duration can be used to measure the sensitivity in the price of the bond to a change in the yield

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