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2. Draw the payoff pattern for buying a call at a certain exercise price. The volatility of the underlying security rises. How do you have

2. Draw the payoff pattern for buying a call at a certain exercise price. The volatility of the underlying security rises. How do you have to change your diagram for the payoff pattern? Explain.

3.Bond X has maturity of 20 years and coupon of 6%. Bond Y has maturity of 30 years and coupon of 4%. Which bond will change more dramatically in price as yields change? Why?

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