Question
Suppose that all investors know with certainty that the short (6-months) interest rates for the future 2 years will be as follows: Year 0
Suppose that all investors know with certainty that the short (6-months) interest rates for the future 2 years will be as follows: Year 0 (today) 0.5 1 1.5 Short Interest Rate Tos = 0.50% =2.20% = 3.00% r= 3.80% 25= 4.50% Given the information above, what is approximately the price of the 2-year maturity coupon bond with face value $1,000 and coupon rate 10% (paid semi-annually)?
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