Suppose that the 1-year spot rate is 1%, the 2-year spot rate is 2% and the 3-year spot rate is 3%. What is the price of a $1,000 par value 3-year bond paying a 2.5% annual coupon payment?

Select one:

a.

$1,014.42

b.

$938.02

c.

$986.80

d.

$1,044.11

(The following information applies to the next two questions.) You have just purchased a 12-year bond with a 10% coupon rate, 8% yield to maturity and a par value of $1,000. Coupon payments are semiannual. What is the purchase price of the bond? Select one: a. $1,152.47 O b. $862.01 c. $1,150.72 d. $1,914.82 Clear my choice What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is at the time you sell is 7%. Select one: a. -5.25% O b. 8.00% O c. 10.85% O d. 15.19%