Q1. Two Year rate zero is currently trading at 2.0% yield and FIVE year zero trading at 2.5% rate. Overnight cash yield is 1.5%

a. What is the duration for cash, 2y and 5y bond respectively (Show all work)

b. You think yield curve will flatten as Fed raises short term federal fund rate. If you LONG 10 million of 5Y bond, how many dollars of short position do you need to take in the 2Y in order to offset the dollar duration risk? (Show all work)

c. Yield curve flattened: 2Y yld went up by 20 bps and 5Y yld went up by 15 bps. What is your profit or loss (PnL) for the above position based on duration? (Show All Work)

d. Yield curve steepened. 2Y yld went down by 15 bps and 20Y yld went down by 10 bps. What is your PnL based on duration? (Show All Work)

e. What is your position in cash for the zero-cost portfolio? What is your one day interest carry (net int pmt) for the zero-cost duration neutral position (Show All Work)