18) Suppose that all investors expect that interest rates for the 4 years will be as follows:

Year Forward Interest Rate

0 (today) 4%

1 5%

2 6%

3 7%

What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Par value = $1,000)

A) $1,092

B) $1,054

C) $1,000

D) $1,10 7

E) None of the options are correct.