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(a) What is the price of 3-year zero coupon bond? (4 marks) Suppose that all investors expect the following pattern of interest rates: Year 0

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(a) What is the price of 3-year zero coupon bond? (4 marks)

Suppose that all investors expect the following pattern of interest rates: Year 0 Forward Interest Rate (spot, today) 5% 7% 9% 10% 1 2 3 Assuming the par value of bonds is $1000, (a) What is the price of 3-year zero coupon bond? (4 marks)

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