A 2-Year T-Note Has a Face Value of $1,000 and Pays

question 31

Multiple Choice

A 2-year T-Note has a face value of $1,000 and pays annual coupons of $75. The next coupon is due in one year. What is the correct price for the coupon bond today? Use the term structure of interest rates shown below to answer the question. $$\begin{array} { | c | c | } \hline \text { Term } & \text { Spot Rate } \\\hline \text { 1-year } & 6.5 \% \\\hline \text { 2-years } & 8 \% \\\hline\end{array}$$

• A)$982
• B)$992
• C)$1,002
• D)$1,012
• E)$1,022

---

Definitions:

Memory

The cognitive function that allows individuals to store, retain, and recall information.

Operant Conditioning

Learning that takes place as a consequence of behavior; a person’s actions are instrumental in determining whether learning takes place.

Positive Reinforcement

A technique used to encourage desired behavior by offering rewards or positive outcomes following that behavior.

Vibrations

Oscillatory motions or energy waves moving through a medium or vacuum.