Suppose you are faced with the following term structure of interest rates:

1-year spot rate is 7%

2-year spot rate is 13%

the spot rate for all future horizons beyond 2 years is the same and is 20%.

Now consider a bond with a $100 face value maturing in two years. The bond pays annual coupons at a 5% coupon rate.

Which one of the following given answers is closest to its market value? Please round your calculation to the nearest 2nd decimal.

A.

$86.90

B.

$77.08

C.

$96.14

D.

$100.00

E.

$105.00