Question: 2. The continuously compounded yield curve is given as follows: Calculate the duration and convexity of the following securities: (a) A 1.5 year coupon bond

2. The continuously compounded yield curve is given as follows: Calculate

2. The continuously compounded yield curve is given as follows: Calculate the duration and convexity of the following securities: (a) A 1.5 year coupon bond paying 4% semi-annually. (b) A 1 year floating rate bond with a 60 basis point spread, with coupons paid semiannually. Compute its duration and convexity immediately after issuance (i.e., the first coupon is fixed). Note that: floating coupon with spread s= floating coupon with zero spread + fixed coupon s. (c) Construct a duration hedge for a 2 year coupon bond (with coupon rate 4% semiannually) using 6 month ZCBs. (d) Construct a duration and convexity hedge for the 2 year coupon bond using 6 month and 1 year ZCBs. (e) You are additionally given the following information: Construct a hedge for the 2 year coupon bond using 6 month and 1 year ZCBs. The portfolio must hedge against movements in both level and slope

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