For this question, assume that you can borrow AND lend at the given zero rates Suppose you observe the following rates today (at time 0); 4-Yr Zero 3-Yr Zero $100 $100 Yield 3% 2% Create a strategy today (at t=0) that allows you to take advantage of the upward slope of the yield curve. If necessary (and it is not necessary), you may assume that it is a strategy per $1 of investment. Suppose that right after instantaneously after) you set up your strategy (just after time 0), yields change to the following: FV 4-Yr Zero $100 3% 3-Yr Zero $100 2% Yield Notice that this change in zero yields will affect the return to the strategy you just set up at time zero (t=0). What is the annualised return to the strategy you created at time 0, if rates do not change further? 9.2% -9.3% 3.0% 6.15 3.3% For this question, assume that you can borrow AND lend at the given zero rates Suppose you observe the following rates today (at time 0); 4-Yr Zero 3-Yr Zero $100 $100 Yield 3% 2% Create a strategy today (at t=0) that allows you to take advantage of the upward slope of the yield curve. If necessary (and it is not necessary), you may assume that it is a strategy per $1 of investment. Suppose that right after instantaneously after) you set up your strategy (just after time 0), yields change to the following: FV 4-Yr Zero $100 3% 3-Yr Zero $100 2% Yield Notice that this change in zero yields will affect the return to the strategy you just set up at time zero (t=0). What is the annualised return to the strategy you created at time 0, if rates do not change further? 9.2% -9.3% 3.0% 6.15 3.3%