2) Set up a system with the two equations constructed in (1) pls solve by using the quadratic formula

Complete the exercise and provide the values of the rates r1 and r2.

PROBLEM 1.2. We are given two risk-free bonds which are due to pay (only) the cash-flows reported in Table 2, in one and in two years from today, namely at t = 1 and at t = 2. Today's market prices of Bond A and Bond B are SEK 104.8425 and SEK 114.5035, respectively. t=1 Bond A 5 Bond B 10 TABLE 2. t= 2 105 110 1.2.1. Calculate the yields to maturity of Bond A and Bond B. 1.2.2. The term-structure of the interest rates is a list of the rates of interest for future payments due at different points in time. The information given in Table 2 allows us to construct a "mini term-structure" including the one year, and the two year-rate of interest, denoted by n and r2. To this purpose, we should: (1) Write the equations expressing the present values of Bond A and Bond B as functions of the "unknown" rates ri and r2. For example, for Bond A, we can write 5 105 104.8425 = = 1+r1 +- (1+2) = 5 x p + 105 x P2, where we set p = ith, and P2 = authto simplify further algebraic manipu- lations. PROBLEM 1.2. We are given two risk-free bonds which are due to pay (only) the cash-flows reported in Table 2, in one and in two years from today, namely at t = 1 and at t = 2. Today's market prices of Bond A and Bond B are SEK 104.8425 and SEK 114.5035, respectively. t=1 Bond A 5 Bond B 10 TABLE 2. t= 2 105 110 1.2.1. Calculate the yields to maturity of Bond A and Bond B. 1.2.2. The term-structure of the interest rates is a list of the rates of interest for future payments due at different points in time. The information given in Table 2 allows us to construct a "mini term-structure" including the one year, and the two year-rate of interest, denoted by n and r2. To this purpose, we should: (1) Write the equations expressing the present values of Bond A and Bond B as functions of the "unknown" rates ri and r2. For example, for Bond A, we can write 5 105 104.8425 = = 1+r1 +- (1+2) = 5 x p + 105 x P2, where we set p = ith, and P2 = authto simplify further algebraic manipu- lations