You currently hold a 2-year fixed rate bond paying 4% annually. You would like to hedge against changes in the level and the slope of the yield curve and you plan to use a 1-year zero coupon bond and a 4-year zero coupon bond as hedging instruments. Use the following table to compute the adequate positions in the hedging instruments.

Maturity 1 2 Z(t, T)

1 1.115 -0.254 0.98

2 0.994 -0.301 0.96

3 0.964 -0.147 0.93

4 0.933 0.008 0.89