Short Question 6 (11 points) Your bond portfolio has a large position in a 3-year corporate bond issued by a real estate company Yellow River Holdings. The bond pays coupon annually with a face value of $100 million. The current bond portfolio value is $100 million with a yield to maturity of 8%. You are worried about the interest rate hikes that might affect the Yellow River bond. (a) What is the coupon rate of the bond? (2 points) (b) What is the modified duration of the bond? (2 points) (c) If the yield of Yellow River bond increases by 1 basis point, what is the change in the bond's value approximated by duration? (2 points) (d) Assume that the yield of Yellow River bond and the yield of the 3-year zero-coupon Treasury bond always fluctuate by the same amount. Assume the FV of the 3-year zero-coupon Treasury bond is 1000. Based on the information above, how many 3- year zero-coupon bonds should you long or short to hedge against the interest rate risk of the Yellow River bond? (5 points) Short Question 6 (11 points) Your bond portfolio has a large position in a 3-year corporate bond issued by a real estate company Yellow River Holdings. The bond pays coupon annually with a face value of $100 million. The current bond portfolio value is $100 million with a yield to maturity of 8%. You are worried about the interest rate hikes that might affect the Yellow River bond. (a) What is the coupon rate of the bond? (2 points) (b) What is the modified duration of the bond? (2 points) (c) If the yield of Yellow River bond increases by 1 basis point, what is the change in the bond's value approximated by duration? (2 points) (d) Assume that the yield of Yellow River bond and the yield of the 3-year zero-coupon Treasury bond always fluctuate by the same amount. Assume the FV of the 3-year zero-coupon Treasury bond is 1000. Based on the information above, how many 3- year zero-coupon bonds should you long or short to hedge against the interest rate risk of the Yellow River bond? (5 points)