1. Calculate the value of a 10-year Treasury futures contract (priced
in points, 32nds of 100%) after settlement on day 2 if the contract
was
purchased for 102-17, first trading day's settlement was 103-08, and
the second day's settlement was 103-27.  The minimum tick size (1/32)
movement is $31.25.

2. What is the spread, in basis points, between a corporation's note
with a coupon of 6.5%, 7-year remaining term, and selling for 101-3/8,
and the corporation's debenture with a coupon of 9.5%, 18-year
remaining term, and selling for 98-3/4?

3. To hedge against falling interest rates, would an investor buy
interest rate futures or sell interest rate futures?  In doing so, is
the investor transferring the futures risk premium to the speculator
or is the investor retaining the futures risk premium but offsetting
the falling interest rate risk?

4. Briefly explain why the issuer of a floating bond with a cap
effectively holds a call option on interest rates with an exercise of
the cap rate.