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. Suppose you own $ 1 , 0 0 0 worth of two - year zero coupon bonds. ( a ) what position would you

. Suppose you own $1,000 worth of two-year zero coupon bonds.
(a) what position would you need to take in 20-year zero coupon bonds to get duration neutral?
(b) Suppose you took the position in 20-year from part (a). Using the duration approximation,
what would be the approximate change in the value of your portfolio if the yield curve steepened
1%
I.e., what happens if the 20-year rate increases 100 basis points more than the 2-year rate?
Assume the yield curve started flat at 5.26%(i.e., y=1/19)

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