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2. Imagine you manage a fixed-income bond portfolio and you are considering purchasing Citigroup's 5-year bonds. You gather the following information: [Note: the swap quote

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2. Imagine you manage a fixed-income bond portfolio and you are considering purchasing Citigroup's 5-year bonds. You gather the following information: [Note: the swap quote assumes the fixed rate leg is paid semi-annually. You can ignore any differing day count conventions here and assume all fixed and floating payments are made on an actual/365-day basis.] a. Between Citigroup's fixed and floating rate bond yields, which alternative offers the best return to the fixed rate investor who considers the possibility of swapping floating rate bonds into a synthetic fixed rate return? What is the approximate advantage in basis points per annum of the better alternative? b. Now assume the floating rate bonds are trading at a price of 99%, instead of par. If all other inputs are unchanged from part a) above, would this lower price alter your decision? Why or why not

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