Suppose That All Investors Expect That Interest Rates for the 4

question 19

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: $$\begin{array} { l | l | } \hline \text { Year } & \text { Forward Interest Rate } \\\hline 0 & \text { (today) } 5 \% \\\hline 1 & 7 \% \\\hline 2 & 9 \% \\\hline 3 & 10 \% \\\hline\end{array}$$
-What is the price of 3-year zero coupon bond with a par value of $1,000?

• A)$863.83
• B)$816.58
• C)$772.18
• D)$765.55
• E)none of the above

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