3. Consider three zero coupon bonds of maturities 1, 5 and 20 years. A trader constructed a butterfly portfolio using the three zeros, which has zero market value and Macaulay durations for the long and short positions matched. Determine the composition of the butterfly and explain under what circumstances will the trader have a loss.

Consider the following three bond quotes; a treasury note quoted at 87.25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. if the treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? multiple choice $872.50, $1,000, $1,000, respectively $1,000, $1,024.20, $1,001.45, respectively $872.50, $1,024.20, $5,072.50, respectively $1,000, $1,000, $1,000, respectively