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The one year spot interest rate is 2% and the two year spot rate is 4%. What is the price of a two-year bond with

The one year spot interest rate is 2% and the two year spot rate is 4%. What is the price of a two-year bond with face value 1,000 and coupon rate 2%? Assume that coupons are paid annually.

a.

963.05

b.

960.69

c.

962.66

d.

1000.38

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