Question
6. Spot rates of interest for zero-coupon Government of Canada bonds are observed for different terms to maturity as follows: 1-year spot rate 4% 2-year
6. Spot rates of interest for zero-coupon Government of Canada bonds are observed for different terms to maturity as follows:
1-year spot rate 4%
2-year spot rate 4.5%
3-year spot rate 5%
A 3-year bond has a face value of $1,000 and a coupon rate of 7%. It pays coupons annually.
What is its value today? (3 marks)
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Financial Management And Policy
Authors: James C. Van Horne
11th Edition
0137512236, 9780137512232
