(14 points) Using Treasury securities, design a trading strategy that makes a profit if the yield curve flattens, i.e., if y10 - y2 decreases. You may use the following approximation: 72,t = Levelt 0.1Slopet = 710,t = Levelt + 0.4Slopet = where Levelt is the level factor of the yield curve and Slopet is the slope factor (so, Level and Slope are the first two principal components). Design the trading strategy such that it is immune to changes in the level of the yield curve. Further, size the trades such that for every basis point decrease in the slope factor, the strategy makes $10,000. For the quantitative calculations, you may ignore transaction and financing costs. Furthermore, you may use the following information: 2-year T-note 10-year T-bond Yield 1.6% 1.8% Modified duration 1.96 9.11 (14 points) Using Treasury securities, design a trading strategy that makes a profit if the yield curve flattens, i.e., if y10 - y2 decreases. You may use the following approximation: 72,t = Levelt 0.1Slopet = 710,t = Levelt + 0.4Slopet = where Levelt is the level factor of the yield curve and Slopet is the slope factor (so, Level and Slope are the first two principal components). Design the trading strategy such that it is immune to changes in the level of the yield curve. Further, size the trades such that for every basis point decrease in the slope factor, the strategy makes $10,000. For the quantitative calculations, you may ignore transaction and financing costs. Furthermore, you may use the following information: 2-year T-note 10-year T-bond Yield 1.6% 1.8% Modified duration 1.96 9.11