1. Duration of a bond is defined as the weighted average of the times at which payments are made to the bondholder. Changes in the bond price do not have any impact on the duration of a bond when everything else is kept the same.

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2.

Consider an investor with the following portfolio: (1) short position in stock F, (2) an investment of proceeds from sale of stock F in a risk-free bond maturing on the day stock F should be returned to its owner, (3) a short position in a futures contract with stock F as underlying that expires on the same date when stock F should be returned to the owner. If the futures contract is priced fairly, the expected cash flow at futures maturity is $0.

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