Only question 1 needs to be answered. Show your work/process to getting the answer.

MM=million

It is April 13, 2017. Consider the following Treasury yield curve YTM 3/31/19 2.00% 100.00 3/15/22 3.50% 100-00 2/28/27 4.75% 100-00 Maturity Price 2-year 5-year 10-year There are 2 portfolios, each with $100MM market value. Portfolio l: 5-year bullet. Portfolio Il: 2-year/10-year barbell. 1.) Today, you invest the $100MM in each portfolio, so that the portfolios have the same duration. The trades settle tomorrow. How much is invested in the 2-year and in the 10-year? Suppose on October 14, 2017 the 2-year ytm increases 50bp and the 10-year ytm increases 25 bp. 2.) What are the price and yield for the 5-year that produce the same realized total rate of return for the bullet and the barbell for this 6-month investment period? 3.) Discuss the issues/complexities involved with solving these questions