Q2_ (40 Marks) A corporate treasurer expects the Canadian short-term yield curve to change from the present position and expects the rates will change in a non-parallel fashion. The treasurer would like to profit from the possible change in the yield curve, the Table below displays relevant market information. Given this scenario, the corporate treasurer would like to profit from this possible change in the yield curve by trading BAX futures. Table: Market conditions AUGUST 1 SEPTEMBER 17 A BPS Sep. BAX futures $98.42 $98.00 (7.) (Implied Yield) (2.) (4.) (8.) Dec. BAX futures 97.50 97.30 (9.) (Implied Yield) (2.) (5.) (10.) BAX Sep/Dec Spread (3.) (6.) (11.) a) (5.5 marks) Complete the above table; fill in the space between the brackets. Answer by 1.5 , 2.5, 3. = ...etc. b) (19.5 Marks) Name and outline the strategy the trader must use. Calculate (clearly show all steps) the strategy profit/loss on September 17 for 10 contracts spread, (BPV = $25). Will the yield curve on September 17 steepen, flatten, or stay the same? Will the Basis increase, narrow or stay the same? State the Objective, Strategy, and Result of the hedge? c) (15 marks) In a figure, graph the above yield curve and the price curves that existed on August 1st and September 17th. Make sure to name and label all the relevant points on the graphs. Q2_ (40 Marks) A corporate treasurer expects the Canadian short-term yield curve to change from the present position and expects the rates will change in a non-parallel fashion. The treasurer would like to profit from the possible change in the yield curve, the Table below displays relevant market information. Given this scenario, the corporate treasurer would like to profit from this possible change in the yield curve by trading BAX futures. Table: Market conditions AUGUST 1 SEPTEMBER 17 A BPS Sep. BAX futures $98.42 $98.00 (7.) (Implied Yield) (2.) (4.) (8.) Dec. BAX futures 97.50 97.30 (9.) (Implied Yield) (2.) (5.) (10.) BAX Sep/Dec Spread (3.) (6.) (11.) a) (5.5 marks) Complete the above table; fill in the space between the brackets. Answer by 1.5 , 2.5, 3. = ...etc. b) (19.5 Marks) Name and outline the strategy the trader must use. Calculate (clearly show all steps) the strategy profit/loss on September 17 for 10 contracts spread, (BPV = $25). Will the yield curve on September 17 steepen, flatten, or stay the same? Will the Basis increase, narrow or stay the same? State the Objective, Strategy, and Result of the hedge? c) (15 marks) In a figure, graph the above yield curve and the price curves that existed on August 1st and September 17th. Make sure to name and label all the relevant points on the graphs