Question #6
Reading: Reading 26 The Arbitrage-Free Valuation Framework
PDF File: Reading 26 The Arbitrage-Free Valuation Framework.pdf
Page: 3
Status: Incorrect
Correct Answer: A
Your Answer: B
Question
The government bond spot rate curve is given below: Maturity (years) Spot rate 0.5 1.25% 1.0 1.30% 1.5 1.80% 2.0 2.00% 2.5 2.20% 3.0 2.25% 3.5 2.28% 4.0 2.30% Compute the issue price of a 3-year, 3% semiannual coupon government bond with a par value of $100.
Answer Choices:
A. $102.15
B. $104.09
C. $102.20
Explanation
Value =
= $102.20