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You hold a bond portfolio that consists of (i) a 4-year bond with a face value of $100 that pays an annual coupon of 10%,

You hold a bond portfolio that consists of (i) a 4-year bond with a face value of $100 that pays an annual coupon of 10%, and (ii) a 2-year bond with a face value of $100 that pays an annual coupon of 20%. The yield curve is flat at ???? = 5%. You are worried about fluctuations in the price of your portfolio. Explain how you can hedge your risk using 3-year zero-coupon bonds with a face value of £100.

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