1. If an investor buys long-term government bonds using proceeds from the sale of short-term government bonds, what kind of bond strategy are they engaged in? (2 marks)
2. Is the duration of such a strategy generally positive or negative? Explain (2 marks)
3. Briefly explain how the inter-market spread strategy works. Provide a simple example (2 marks)
4. Why do banks and other financial institutions engage in duration matching? (2 marks)
5. Explain briefly why duration matched portfolios need to be actively managed (2 marks)