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NEW QUESTION: 1
Determine the price of a 3 year bond paying a 5% coupon. The 1,2 and 3 year spot rates are 5%, 6% and 7% respectively. Assume a face value of $100.
A. $ 94.92
B. $ 106.00
C. $ 100.00
This question requires a calculation of the present value of the future cash flows from the bond. The correct answer is $94.92, calculated as =(5/(1 + 5%)) + (5/(1+ 6%)
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