• You have the following information about prices today, month=0. 1-month t-bill, interest rate 0.01 1 month forward t-bill, from month 1 to month 2, interest rate 0.014 2 month t-bill, interest rate 0.0114 How could you use the information to earn money (today and without any risk) and how much will you earn? (you can buy and sell fractions of t-bills)
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• B) The yield curve is of general interest. Explain what it is and how we can calculate the yield curve from different types of bonds. (i.e. from one 1 year bond and from one 2-year coupon bond). C) Why is Duration a useful measure in Bond management? How could it be used in bond portfolio management?

Answer rating: 100% (QA)

You could buy a 1 month t bill and sell a 1 month forward t bill This would earn you 0 004 on the t ... View the full answer