1.A 3-year bond has 10% coupon rate with interest paid annually. Assume the following sequence of spot rates, what is the price of the bond per 100 of par value?

Time-to-Maturity Spot Rates

1 years 5.0%

2 years 6.0%

3 years 7.0%

2. Bond dealer most often quote which price and why?

a) full price plus accrued interest.

b) full price.

c) flat price. Why is this price quoted?