7. You are in charge of the bond trading and forward loan department of a large investment bank. You have the following Y TM's for five default-free pure discount bonds as displayed on your computer terminal:- Years to Maturity 0 1 2 3 4 5 YTM; 0.06 0.065 0.07 0.07 0.065 0.08 where YTM; denotes the yield to maturity of a default-free pure discount bond maturing at time j. 7(b). A client approaches you looking for an annualized quote on a forward loan of $5 million dollars to be received by the customer at the end of the third year and she will repay the loan at the end of the fifth year. (i) How would you structure your holdings of pure discount bonds so you can exactly match the future cash flows of this loan? Please indicate the number of bonds to be purchased or sold and the involved cost/benefit in dollar terms. (ii) What is the corresponding annualized forward interest rate you quote for your client? 7. You are in charge of the bond trading and forward loan department of a large investment bank. You have the following Y TM's for five default-free pure discount bonds as displayed on your computer terminal:- Years to Maturity 0 1 2 3 4 5 YTM; 0.06 0.065 0.07 0.07 0.065 0.08 where YTM; denotes the yield to maturity of a default-free pure discount bond maturing at time j. 7(b). A client approaches you looking for an annualized quote on a forward loan of $5 million dollars to be received by the customer at the end of the third year and she will repay the loan at the end of the fifth year. (i) How would you structure your holdings of pure discount bonds so you can exactly match the future cash flows of this loan? Please indicate the number of bonds to be purchased or sold and the involved cost/benefit in dollar terms. (ii) What is the corresponding annualized forward interest rate you quote for your client