A 3-year bond off ers a 10% coupon rate with interest paid annually. Assuming the following sequence of spot rates, the price of the bond is closest to:

Time-to-Maturity Spot Rates 1 year 8.0%

2 years 9.0%

3 years 9.5%

A . 96.98.

B . 101.46.

C . 102.95.

Th e following information relates to Questions 15–17 Bond Coupon Rate Time-to-Maturity Time-to-Maturity Spot Rates X 8% 3 years 1 year 8%
Y 7% 3 years 2 years 9%
Z 6% 3 years 3 years 10%
All three bonds pay interest annually.