Determine the composition of the butterfly and explain, Financial Management

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Determine the composition of the butterfly and explain

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.

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Financial Management: Determine the composition of the butterfly and explain

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