QUESTION $15$

Suppose that all investors expect that the interest rates for the $4$ years will be as follows. What is the price of a $3-$year zero coupon bond with par$=$ $$1,000?$ Year

$1-$Year Forward rate

$1$

$4\mathrm{.}6\%$

$2$

$4\mathrm{.}9\%$

$3$

$5\mathrm{.}2\%$

$4$

$5\mathrm{.}5\%$

a$.$ $$1,000\mathrm{.}00$

b$.$ $$866\mathrm{.}32$

C$.$ $$858\mathrm{.}92$

d$.$ $$821\mathrm{.}15$