Question
Consider three 5-year regular coupon bonds; each bond has a face value of $100. All bonds mature on the same date. All bonds pay annual
Consider three 5-year regular coupon bonds; each bond has a face value of $100. All bonds mature on the same date. All bonds pay annual coupons at the same point in time. The coupons and current market prices for these bonds are given as following.
| Bond | COUPON | Market PRICE |
| A | $8.000 | $95.169 |
| B | $4.000 | $80.552 |
| C | $7.000 | $X |
Assuming that current market prices of Bond A and Bond B are correct, then what should be the theoretical (fundamental) market price of Bond C, as per the no-arbitrage principle?
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Handbook Of Business Valuation
Authors: Thomas L. West, Jeffrey D. Jones
2nd Edition
0471297879, 978-0471297871
