(a) Treasury bond markets in New Zealand and the U.S. are dealer mar- kets. What are the pros and cons of this market structure as com- pared to trading securities on an exchange? (b) The Reserve Bank of New Zealand reports the following (annually compounded) treasury bond spot rates (as of 26 July 2022). Maturity Rate

1 year 3.38

2 years 3.53 5 years 3.53

10 years 3.60 Can we conclude that the market is expecting short term interest rates to rise over the next 10 years? Discuss. (c) You are in the United States. The date is 26 July 2022. You decide that the market has under-estimated the yield on long term Treasury bonds. You observe the following bond: Maturity 15 May 2052

Coupon 2.875

Price 97.1340

Yield 3.007 Describe how you would use this bond to trade in order to profit from your beliefs.