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3 . You observe the following market prices for risk - free bonds Bond Maturity Coupon rate Price T - bill 1 Year 0 %

3. You observe the following market prices for risk-free bonds
Bond Maturity Coupon rate Price
T-bill 1 Year 0% $97.5
Canada Bond 3 Years 2.25% $88.53
Canada bond 3 Years 5.25% $96.57
(a) All bonds have a face value of $100 and all coupon bonds have annual coupon payments. Use the above information to price the following risk-free bonds.
(1) A 3 year zero-coupon bond.
(2) A 2 year 5.25% Canada Bond.
(3) A 3 year 7.25% Canada Bond.

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