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Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (annual coupons): Maturity Price Coupon 1 999 T-bill (zero coupon
Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (annual coupons): Maturity Price Coupon 1 999 T-bill (zero coupon bond) 2 1003 6.3% 3 1008 7.5% a. Construct the term structure of interest rates for these three years. b. Your company plans to issue four-year maturity bonds. You plan to issue bonds priced at $1085. At what level should you plan to set the coupon on your bond to justify this price?
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