Question 2: 10 marks each. Total 20 Marks 1) A portfolio manager has a $400 million in the bond portfolio. The duration of the bond portfolio is 1.5. The current November Eurodollar futures contract is trading at 99.8. What is the number of ED futures contract the manager needs to sell in order to hedge the market risk in the portfolio? 2) Given the following market information: is there any arbitrage opportunity? If yes, show how it can be done. 1.2 2% Spot 1-year 1-year 1-year forward CAD/SGD CAD interest rate SGD interest rate CAD/SGD per year per year 1% 1.195