Question: 2. (30 points) Consider 2 bonds where A is a 5-year bond with coupon rate 10% paid once at the end of each year, B

2. (30 points) Consider 2 bonds where A is a 5-year

2. (30 points) Consider 2 bonds where A is a 5-year bond with coupon rate 10% paid once at the end of each year, B is a 10-year bond with coupon rate 10% paid 2 times in a year. You may assume that the nominal or face value is $100 and that the current yield is 8%. a) (8 points) Determine the market prices of A and B, b) (8 points) Determine the durations of A and B, c) (8 points) If there is a financial obligation to pay $10,000,000 at the end of 6 years, find a portfolio of bonds A and B that will immunize your risk against changes in the interest rate market. What are the number of shares of A and B in the portfolio? d) (6 points) If the yield drops to 6%, what is the diffence between the value of the portfolio and the obligation

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