A bank has $20M face value of a certain bond. The current price of these bonds are 0.90 (thus the value of this position is currently $18M), and the duration of these bonds is 3. Suppose that the bank bought puts on $15M FV worth of these same bonds, each with a strike price of 0.90.

QUESTION 7 If the value of the bonds stay the same, what is the value of the options at expiration?

QUESTION 8 If the interest rate factor increased by 2% marketwide, what would the new value of these bonds be?

QUESTION 9 If the options were expiring at this point, what is the value of the options?

QUESTION 10 What would the combined value of the options and the bond position be?