Pricing a coupon bond off the spot curve
The zero-coupon (spot) curve is: 1-year rate , 2-year rate (annual compounding). A 2-year bond with $100 face pays a 6% annual coupon. What is its no-arbitrage price, in dollars to two decimals?
Show hints (2)+
- Discount each cash flow at the spot rate for its own maturity.
- .
Answer
Reveal answer →Final answer
101.91 (± 0.02)
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