5. A bank has a $5 million market value position in a 8-year, zero coupon bond. The bond is yielding 8%. The mean change in the daily yields of the 8-year, zero coupon bond has been 5 basis points over the past year with a standard deviation of 10 basis points. Using these data and assuming the yield changes are normally distributed:

1. (4 points) What is the highest yield change expected if a 99 percent confidence level is required?

(b) (4 points) What is the daily earnings at risk (DEAR) using a 99 percent confidence level?