All Three Bonds Pay Interest Annually

question 38

Multiple Choice

$\begin{array}{l}\text { The following information relates to Questions } 15 - 17\\\begin{array} { l c c c c } \hline \text { Bond } & \text { Coupon Rate } & \text { Time-to-Maturity } & \text { Time-to-Maturity } & \text { Spot Rates } \\\hline \mathrm { X } & 8 \% & 3 \text { years } & 1 \text { year } & 8 \% \\\mathrm { Y } & 7 \% & 3 \text { years } & 2 \text { years } & 9 \% \\\mathrm { Z } & 6 \% & 3 \text { years } & 3 \text { years } & 10 \% \\\hline\end{array}\end{array}$
All three bonds pay interest annually.
-based upon the given sequence of spot rates, the price of bond Y is closest to:

• A) 87.50.
• B) 92.54.
• C) 92.76.

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Definitions:

Retail Store

A business establishment that sells goods and services directly to consumers, typically at a markup from wholesale prices.

Interest

The fee for borrowing funds or the reward for lending them, often stated as a percentage of the initial sum.

Furniture

Movable objects intended to support various human activities such as seating, eating, and sleeping.

Focal Date

A specific date used as a reference point for financial calculations, such as the valuation of an asset or the determination of an interest period.