AdvancedMultiple choice
Reading the curve · Part 3 of 3
The one-year zero rate is 4.0% and the two-year zero rate is 4.5%, both annually compounded. The ten-year yield is 3.5%.
You expect the two-to-ten curve to steepen but have no view on the level of rates. How do you express it?
- ABuy two-year bonds and sell ten-year bonds, sized to equal DV01
- BBuy ten-year bonds and sell two-year bonds in equal notional
- CBuy both two- and ten-year bonds in equal amounts
- DBuy two-year bonds and sell ten-year bonds in equal notional amounts on each side
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