3. The continuously compounded yield curve is given as follows: Maturity (years) Yield 0.5 5% 1 5.5% 1.5 6% 2 6.5% Calculate the duration and convexity of the following securities: (a) A 2 year coupon bond paying 4% semi-annually. (b) A 1 year floating rate bond with a 50 basis point spread, with coupons paid semi- annually. Compute its duration and convexity immediately after issuance (i.e. the first coupon is fixed). (e) Construct a duration hedge for the 2 year coupon bond using 6 month ZCBs