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QUESTION 2 A Government has issued two bonds: Bond A will pay a coupon of 100 on 1 January next year, and which will then pay coupons on 1 January every year thereafter (forever), with the coupon increasing by 4% every year. Bond B will pay a fixed annual coupon each year (forever), with the coupon being paid on 1 January each year. Assume that the appropriate discount rate for both bonds is 7% in annualized terms. If it is now January 2, and both bonds have the same current price, what is the coupon of Bond B? A. 200 B. 260 C. 233 D. 175