Question: An oil company issues a bond whose coupons depend on the market price P(t) of a barrel of crude oil. This bond expires in exactly

An oil company issues a bond whose coupons depend on the

An oil company issues a bond whose coupons depend on the market price P(t) of a barrel of crude oil. This bond expires in exactly 2 years, pays off an annual coupon (there are 2 coupons due) plus a principal of 100 at maturity. Each coupon C(t) is calculated as follows (for t = 1 and t = 2): C(t) = 4 = 2 x (2 + (P(t) 18)/5) = 6 if P(1)

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