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2018: Canadian interest rates are 1% and the Canadian 10 yearpar valuebond is issued with annual coupon of 1% with face value 1,000CAD. 2019: Canada
2018: Canadian interest rates are 1% and the Canadian 10 yearpar valuebond is issued with annual coupon of 1% with face value 1,000CAD.
2019: Canada decreased interest rates to 0.50% and bond yields followed perfectly.
2020: Canada keeps interest ratesat 0.50% andissues a new 10 yearpar valuebond with annual coupon of 0.50% with face value 1,000CAD.
What is the price of the 2018 Canadian Bond today, with 8 years left until maturity, such that its yield is equal to the 2020 bond yield?
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