Question: QUESTION 2 Assume the yield curve is flat at 5.5% pa nominal. A cash and $duration-neutral butterfly is to be constructed by selling one thousand

QUESTION 2 Assume the yield curve is flat at 5.5% pa

QUESTION 2 Assume the yield curve is flat at 5.5% pa nominal. A cash and $duration-neutral butterfly is to be constructed by selling one thousand 6-year zero coupon bonds and purchasing q_s and q_l zero coupon bonds with maturities 3 and 13 years' respectively. We assume that interest accrues semi- annually. We also assume each bond has a face value of $100. (a) What is the price of the 3-year bond? [ Select ] (b) What is the price of the 6-year bond? (Select] (c) What is the price of the 13-year bond? (Select ] (d) What is the modified duration of the 3-year bond? [Select ] (e) What is the modified duration of the 6-year bond? [Select] (f) What is the modified duration of the 13-year bond? [Select] (g) What is the standardized convexity of the 3-year bond? [Select] (h) What is the standardized convexity of the 6-year bond? (Select ] (i) What is the standardized convexity of the 13-year bond? [Select ] (j) What is the cash-neutral equation in the system of equations needed to find q_s and q_I? [Select] (k) What is the $Duration-neutral equation in the system of equations needed to find q_s and q_l? QUESTION 2 Assume the yield curve is flat at 5.5% pa nominal. A cash and $duration-neutral butterfly is to be constructed by selling one thousand 6-year zero coupon bonds and purchasing q_s and q_l zero coupon bonds with maturities 3 and 13 years' respectively. We assume that interest accrues semi- annually. We also assume each bond has a face value of $100. (a) What is the price of the 3-year bond? [ Select ] (b) What is the price of the 6-year bond? (Select] (c) What is the price of the 13-year bond? (Select ] (d) What is the modified duration of the 3-year bond? [Select ] (e) What is the modified duration of the 6-year bond? [Select] (f) What is the modified duration of the 13-year bond? [Select] (g) What is the standardized convexity of the 3-year bond? [Select] (h) What is the standardized convexity of the 6-year bond? (Select ] (i) What is the standardized convexity of the 13-year bond? [Select ] (j) What is the cash-neutral equation in the system of equations needed to find q_s and q_I? [Select] (k) What is the $Duration-neutral equation in the system of equations needed to find q_s and q_l

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