Please assist with part a) and B) part i and ii

5. Interest rate risk management (12 marks) (a) Assume that the term structure is flat with spot rates of 5% for all maturities. Consider a market with the following two bonds: Bond A is a 2-year 3% coupon bond with a face value of $100. It trades for $96.28. Bond B is a 3-year 4% coupon bond with a face value of $100. It trades for $97.28. Work out the Macaulay Duration of the two bonds.(4 marks) Bons a Maca eo os) (b) Suppose you have a liability consisting of 2 repayments, the first due in 2 years time of $500 and the other due in 3 years' time of $1000. Set up a portfolio using the bonds which immunises this liability. i. Calculate the duration of this liability. (4 marks) For mnisaton, the clsaton mut equa) to ^emi Calculate how many units' of each bond you should buy, assume $100 face value = 1 unit. (4 marks)