(i) A 5-year bond with face value $1,000 (paid at maturity) and coupon rate 5% (coupon paid in arrears annually) has yield-to-maturity 4.5%. What is the convexity of the bond?

(ii)Assume that stock returns follow a 2-factor structure. The risk-free return is 3%. Portfolio A has average return 8% and factor-betas 0.7 and 0.9 (for factor 1 and 2, respectively). Portfolio B has average return 10% and factorbetas 1.2 and 1.1 (for factor 1 and 2, respectively). What is the average return for portfolio C that has factor-betas 1 and 1 (for factor 1 and 2, respectively)?