Suppose That All Investors Expect That Interest Rates for the 4

question 62

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{lc}\text { Year } & \text { Forward Interest Rate } \\0 & \text { (today) } 3\% \\1 & 4\% \\2 & 5\% \\3 & 6\%\end{array}$ What is the price of 3-year zero-coupon bond with a par value of $1,000?

• A) $889.08
• B) $816.58
• C) $772.18
• D) $765.55
• E) None of the options are correct.

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