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

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Definitions:

Loud Alarm

A sound-producing device designed to alert or warn individuals of a specific condition or danger.

Unconditioned Stimulus

A stimulus that naturally and automatically triggers a response without prior conditioning or learning.

Food

A sustenance that individuals or creatures consume or imbibe to support existence and promote growth.

Unconditioned Response

An Unconditioned Response is an automatic, natural reaction to an unconditioned stimulus, not learned through previous experience.