Consider the Following Interest Rates: R₀₁ = 10%,r₁₂ = 11%,r₀₃

question 15

Essay

Consider the following interest rates: r₀₁ = 10%,r₁₂ = 11%,r₀₃ = 12%,r₃₄ = 13%,and r₀₅ = 14%,where r_0t is the annual spot rate for period t and r_{t t+1} is the annual forward rate from period t to t + 1.What is the price of a $1,000 par bond with 5 years to maturity that has an annual coupon rate of 10% and annual coupon payments?

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