The DV01 of a Treasury bond maturing on November 15, 2021, with an 8 percent coupon

(4 percent paid semiannually) and a $100 face value is $.10. The DV01 of a Treasury note maturing on May 15, 2012, with a 7 percent coupon (3.5 percent paid semiannually) and a

$100 face value is $.06.

a. What is the accrued interest (per $100 face value) to be paid on both the bond and the note for a purchase with a settlement date of June 11, 2002, for each of these fixed-income securities? Hint: See Chapter 2.

b. If you held a position of $1 million (face value)

in the Treasury bond, what position should you hold in the Treasury note to eliminate all interest rate risk?

AppendixLO1