Question 1. a) [5 point] Compute the value of a 2-year bond with annual coupons of 5% and face value of $1,000. The hond's annual yield-to-maturity (Y TM) is 4% compounded semiannually. h) [5 points] Convert the hond's YTM in a) to the annual continuously compounded rate and use this to nd the value of the bond price using the continuous discounting hond representation: BET) = 2:2.- clamyer!) i=1 Question 2. Consider a 2-year semiannual bond with annual coupons of 5% coupon and face value of $1,000. The hond's annual yield-to-mannity is 4% compoimded semiannually. a) [5 point] Estimate the bond's duration and convexity. b) [5 point] Estimate the new bond prices using the duration adjustment when the annual yield changes by 1% and 05%. c) [5 point] Estimate the new bond prices using the duration and convexity adjustment when the annual yield changes by 1% and 40.5%