1.) Today you invest the $100MM in each portfolio, so the portfolios have the same duration. The trades settle tomorrow.

How much is invested in the 2-yr and in the 10-yr.?

2.) Suppose you believe that 9 months from today 2-yr yield will be 50 basis points higher and the 10-yr yield will be 25 basis points lower.

Which strategy outperforms on a total rate of return basis?

3.) Discuss the issues/complexities involved with solving these questions.

3 It is November 15, 2018 5 Consider the following Trea curve. MaturityYTMPrice 10/31/2020 2.00% 100-00 10/31/2023 3.50% 100.00 10/15/2028 4.75% 100-00 10 10 12 There are 2 portfolios, each with S100MM market value 13 Portfolio I 5-year bullet. 14 Portfolio II: 2-year/10-year barbell 16 17 have the same duration. The trades settle tomorrow. 18 19 20 21 2.) Suppose you believe that 9 months from today the 2 22 50 basis 23 24 25 26 3.) Discuss the issues/complexities involved with solving these questions 1.) Today, you invest the S100MM in each portfolio, so that the portfolios a.) How much is invested in the 2-year and in the 10-year? ield will be s lower s higher and the 10-year yield will be 25 basis p a.) Which strategy outperforms on a total rate of return basis? 3 It is November 15, 2018 5 Consider the following Trea curve. MaturityYTMPrice 10/31/2020 2.00% 100-00 10/31/2023 3.50% 100.00 10/15/2028 4.75% 100-00 10 10 12 There are 2 portfolios, each with S100MM market value 13 Portfolio I 5-year bullet. 14 Portfolio II: 2-year/10-year barbell 16 17 have the same duration. The trades settle tomorrow. 18 19 20 21 2.) Suppose you believe that 9 months from today the 2 22 50 basis 23 24 25 26 3.) Discuss the issues/complexities involved with solving these questions 1.) Today, you invest the S100MM in each portfolio, so that the portfolios a.) How much is invested in the 2-year and in the 10-year? ield will be s lower s higher and the 10-year yield will be 25 basis p a.) Which strategy outperforms on a total rate of return basis