Calculate daily earnings at risk (DEAR) for the following components of a portfolio (consider 90% confidence limit where necessary):

Fixed-income securities:

a) The FI has a $1 million position in a five-year zero-coupon bonds with a face value of $1 543 302. The bond is trading at a yield to maturity of 6.50 per cent. The historical mean change in daily yields is 0.0 per cent, and the standard deviation is 32 basis points.

Foreign exchange contracts:

b) The FI has a 3.0 million long trading position in spot euros at the close of business on a particular day. The exchange rate is 0.953/$1, or $1.05/, at the daily close. Looking back at the daily changes in the exchange rate of the euro to dollars for the past year, the FI finds that the volatility or standard deviation () of the spot exchange rate was 75.5 basis points (bp).