The continuously compounded yield curve is given as follows:

0.5 year to maturity, yield = 5%

1 year to maturity, yield = 5.5%

1.5 year to maturity, yield = 6%

2 year to maturity, yield = 6.5%

Calculate the duration andconvexity of the following securities:

1. A 2 year coupon bond paying4% semi-annually
2. 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)
3. Construct a duration hedge forthe 2 year coupon bondusing 6 month zero coupon bond
4. Construct a durationand convexity hedge for the 2 yearcoupon bond using 6 month and 1 year zero coupon bond