For those who will go for the 10% Bonus question, you will need to first create a pure matching portfolio and apply the trades on it taking into consideration that you cannot go negative in any of the securities and as well making sure you have a total MV of the portfolio equivalent to the funds available exactly, which means being cash neutral; neither more nor less i.e: treat every single question as a separate portfolio while considering everything else constant Assuming Germany is the Benchmark and assuming a high conviction trade (very aggressive): 1. If Greek SPREADS to Germany are NOT expected to change over 1-year investment horizon, while at the same time the French spreads are expected to widen to Germany, how would you add the MAXIMUM ALPHA Possible to your portfolio USING Two Country Bonds and what is your break-even spread widening given that you are duration Neutral on the overall portfolio? Show your trade position, the portfolio after you have applied your trade, and the Profit/Loss calculation if the spreads widen/Tighten with 100 bps 2. If Belgian SPREADS to Germany are expected to tighten with 50 bps over 1-year investment horizon, AND you expect the Yield Curve is going to FLATTEN, how would you Add the MAXIMUM Alpha Possible to your portfolio using the Belgian Bonds? Show your trade position, the portfolio after you have applied your trade, and the Profit/Loss calculation if the spreads widen/Tighten with 50 bps