The 1yr, 2yr, 3yr, 4-yr, and 5yr spot rates are 456, 556, 5%, 5.5%, and ll, respectively. All the rates are discretely compou nded. Consider a 5yr,...

Have question of b and e, I wonder that how to solve these questions. There should be two formula to compute the weight of two zero coupon bonds by using duration and convexity.

The 1—yr, 2—yr, 3—yr, 4-yr, and 5—yr spot rates are 456, 556, 5%, 5.5%, and fill, respectively. All the rates arediscretely compou nded. Consider a 5—yr, 10% annual coupon paying bond. Assume all the bonds have a face value of $1,000.[Note: it does not matter what face value you assume to answer the questions below] [a] Calculate the duration and convexityr of this bond. [5 points] [b] HOW many 2—yr and ityr zero coupon bonds should you buy or sell to immunize a portfolioconsisting of 5,000 of these coupon bonds? Use duration and convexity to answer this question. [5 points] {c} Do Principal Components Analysis of I"Interest Rate Data." [5 points] [d] What are the factor durations of the coupon bonds with respect to the level and the slope factor?[5 points] {c} How many 2—yr and day zero coupon bonds should you buy or sell to immunize a portfolioconsisting of 5,000 of the coupon bonds? {5 points} [f] Using regrfision analysis, find out the effect of the level, slope, and curvature factors togetherhave on the 1—yr, 2—yr, 3—yr, ail—yr, and 5—yr rates. [5 points} [g] Just like above, use the 2—yr and 4—yr zero coupon bonds to immunize the portfolio. [5 points}[h] Why is it better above to use Principal Components Analysis than Regression Analysis to immu nize the bond portfolio against interest rate changes? [Read your textbookto answer this question} [5points]