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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 1 942 T-bill 2 995
Consider the following risk-free T-bill and coupon bonds available for sale in the bond market (annual coupons):
Maturity | Price | Coupon |
1 | 942 | T-bill |
2 | 995 | 6.3% |
3 | 998 | 7.5% |
4 | 985.25 | 6.75% |
- Construct the term structure of interest rates (you have enough information to find four rates).
- Your company plans to issue four-year maturity bonds. You plan to issue these bonds priced at $1010. At what level should you plan to set the coupon on your bonds to justify this price?
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