Question: 2. The three U.S. Treasury bonds described below are traded in the market and pay annual coupons. Assume that the par amount for each bond

2. The three U.S. Treasury bonds described below are traded in the market and pay annual coupons. Assume that the par amount for each bond is $100. Bond Maturity (Yr) Coupon Rate (%) A 1 3.5 B 2 5.0 C 3 4.5 Assume that the 1-year interest rate (r1) is 4%, the 2-year interest rate (r2) is 5%, and the 3-year interest rate (r3) is 6%. (a) Write out each bonds cash flow for each year. (b) Find each bonds price. (c) Suppose the Treasury plans to issue a new 3-year note with a $1,000 face value and annual coupons. What coupon rate would they need to set for the bond to initially trade at a price of $1,000?

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