-What Should the Purchase Price of a 2-Year Zero Coupon

question 7

Multiple Choice

$$\begin{array} { l | l } \underline { Y e a r } & \underline { 1 - Y e a r } \text { Forward Rate } \\\hline 1 & 5 \% \\\hline 2 & 5.5 \% \\\hline 3 & 6.0 \% \\\hline 4 & 6.5 \% \\\hline 5 & 7.0 \% \\\hline\end{array}$$
-What should the purchase price of a 2-year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000?

• A)$877.54
• B)$888.33
• C)$883.32
• D)$894.21
• E)$871.80

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Definitions:

Pinna

The visible part of the ear that is outside the head, responsible for collecting sound waves and funneling them into the ear canal.

Auditory Canal

A tubular structure of the outer ear that conducts sound waves from the external environment to the tympanic membrane (eardrum).

Olfaction

The sense of smell, a chemical sensing system that allows the detection of volatile substances in the environment.

Gustation

The sense of taste, which is one of the five sensory systems and is initiated by flavor compounds stimulating the taste buds on the tongue.