Question: 4. Consider three 2-year bonds, A, B, and C, that mature on the same date (exactly 2 years from now i.e. t=2) and pay annual

4. Consider three 2-year bonds, A, B, and C, that mature on the same date (exactly 2 years from now i.e. t=2) and pay annual coupons at the same points in time. All bonds have the same face value of $1000. Bond A has an annual coupon of 2% with a current price of $940. Bond B has an annual coupon of 8% with a current price of $1020.

a) If Bond C has an annual coupon of 10%, what should be its current price that is consistent with no arbitrage?

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