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You are a bond analyst working for a hedge fund. A bond you follow has face value 100, has a coupon rate of 5% (paid

You are a bond analyst working for a hedge fund. A bond you follow has face value 100, has a coupon rate of 5% (paid once a year) and matures in 5 years. You are trying to find if there is any profitable trading strategy. Youve done extensive research and have formed your opinions on future economic conditions. As a result, you expect that there will soon be a major shift in the yield curve. The current and the expected yield curve is shown below:

Year

Current

Expected

1

1%

3.00%

2

1.50%

2.50%

3

2.00%

3.50%

4

3.00%

4.00%

5

5.00%

5.00%

Calculate the price of the bond based on the current yield curve? (use 2 decimal digits)

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