Suppose you are faced with the following spot rates:

y₁ = 6%

_y2 = 7%

_y3 = 8%

Now consider a bond with a $1000 face value maturing in 3 years. The bond pays annual coupon payments at a 5% coupon rate. What is the bond price?

Select one:

a.

$1025.69

b.

$924.37

c.

$926.30

d.

$1000

e.

$874.92