Using your understanding of Fixed Income Securities, discuss the likely method a fund-manager/investor would seek to use Duration and Convexity to their advantage if:

a. Short-term interest rates are predicted to fall, and Long-term interest rates are predicted to rise (a steepening of the yield curve). (1 mark)

b. Long-term interest rates are predicted to fall, and Short-term interest rates are predicted to rise (a flattening of the yield curve). (1 mark)