3. Read the following quote the rom Bank of Namibia June 2020 Quarterly bulletin and answer the questions that follow: The demand for shorter-term fixed-rate treasury bonds was strong during the first quarter of 2020 and yields on short to medium bonds declined by more than 50 basis points.

3.1. Define bond yield (2)

3.2. Briefly explain why strong demand for short term bonds lead to a decline in the yield on short term bonds. (2)

4. Explain what is meant by put-call parity and write down the equation expressing put-call parity, clearly indicating the meaning of the components of the equation (5)