Name one type of fixed income securities that exhibit negative convexity. Then explain, with the help of a diagram, when and why negative convexity will happen.

$(8$ marks$)$

Explain in detail why and how the Conversion Factor would make it equitable to both the buyer and the seller in the settlement of Treasury bond futures contracts.

$(8$ marks$)$

Define and explain default loss rate for evaluating investments in corporate debt. $(5$ marks$)$ How would you compare the default loss rates of an A$-$rated senior unsecured bond and a BBB$-$rated senior secured bond?

$(3$ marks$)$

"The Liquidity Preference Hypothesis suggests that the yield curve should always be upward sloping." Explain why you agree or disagree with this statement.

$(8$ marks$)$