2. (60 points) Suppose that bond A is a 2-year bond with coupon rate 10% paid twice in a year and bond B is a 4-year bond with no coupon payments. You may assume that the nominal or face value is $100 and that the current yield is 6%. a) (20 points) What are the market prices of the two bonds? b) (20 points) What are the durations of the two bonds? c) (20 points) How much does the price of bond A change if the level of interest increases by 1% in the market? 2. (60 points) Suppose that bond A is a 2-year bond with coupon rate 10% paid twice in a year and bond B is a 4-year bond with no coupon payments. You may assume that the nominal or face value is $100 and that the current yield is 6%. a) (20 points) What are the market prices of the two bonds? b) (20 points) What are the durations of the two bonds? c) (20 points) How much does the price of bond A change if the level of interest increases by 1% in the market