2. (26 points) Two bonds are available for purchase in the financial markets. The first bond is a two-year, $1,000 bond that pays an annual coupon of 10 percent. The second bond is a two-year, $1,000, zero-coupon bond. a. (8 points) What is the duration of the first coupon bond if the current yield- to-maturity (R) is 8 percent? What is the duration of the first coupon bond if the current yield-to-maturity (R) is 10 percent? b. (6 points) Calculate the duration of the zero-coupon bond with a yield to maturity of 8 percent and 10 percent. c. (4 points) How does the change in the yield to maturity affect the duration of the zero-coupon bond? d. (8 points) Calculate the convexity of the zero-coupon bond with a yield to maturity of 8 percent and 10 percent. 2. (26 points) Two bonds are available for purchase in the financial markets. The first bond is a two-year, $1,000 bond that pays an annual coupon of 10 percent. The second bond is a two-year, $1,000, zero-coupon bond. a. (8 points) What is the duration of the first coupon bond if the current yield- to-maturity (R) is 8 percent? What is the duration of the first coupon bond if the current yield-to-maturity (R) is 10 percent? b. (6 points) Calculate the duration of the zero-coupon bond with a yield to maturity of 8 percent and 10 percent. c. (4 points) How does the change in the yield to maturity affect the duration of the zero-coupon bond? d. (8 points) Calculate the convexity of the zero-coupon bond with a yield to maturity of 8 percent and 10 percent