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Suppose that the semi-annually compounded Treasury yield curve today looks like 6mo 1y 2% 18mo 2y 3% 2.25% 2.5% r(0, T) B(0,T) 0.9901 0.9779

Suppose that the semi-annually compounded Treasury yield curve today looks like 6mo 1y 2% 18mo 2y 3% 2.25% 2.5% r(0, T) B(0,T) 0.9901 0.9779 0.9634 0.9422 and you have a risk-free portfolio which pays 6mo ly 100 2%-r2(0.5,1) 1. 4pts What is the price of this portfolio? 100 2. 8pts What is the duration of this portfolio? 18mo 2%-r2(1,1.5) 2 2y

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