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Compute the price of a risk-free bond with a face value of $ 1,000 that has four years left to maturity, a coupon rate of
Compute the price of a risk-free bond with a face value of $ 1,000 that has four years left to maturity, a coupon rate of 7%, and makes annual interest payments. Assume that it just made a coupon payment (i.e. it has four annual payments left to make). Also assume that the current term structure of risk-free rates is as follows, Maturity in years 1 2 3 4 5 6 7 Risk-free yields 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
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