. A trader holds 100,000 units of a bond whose features are summarized in the below table. The trader wishes to be hedged against a rise in interest rates.

Maturity	Coupon Rate	YTM	Duration (year)	Price ($)
12 Years	4.5%	7%	?	?

Characteristics of the hedging instrument, which is here a bond are as follows:

Maturity	Coupon Rate	YTM	Duration (year)	Price ($)
20 Years	5%	7%	?	?

Coupon frequency and compounding frequency are assumed to be semiannual. Furthermore, the YTM curve is flat at an 7% level.

1. Once you compute the price and duration, compute the quantity q of the hedging instrument that the trader has to sell?

2. Assuming that the YTM curve increases instantaneously by 0.1%.

(a) What happens if the bond portfolio has not been hedged?

(b) And if it has been hedged?

3. Now provide answers to questions a) and b), while assuming that the YTM curve increases instantaneously by 2%.