Assume the zero-coupon yields on default-free securities are as summarized in the following table:

Maturity	1 year	2 years	3 years	4 years	5 years
Zero-Coupon Yields	3.0%	3.6%	3.8%	4.1%	4.3%

What is the price today of a two-year, default-free security with a face value of $1,000 and an annual coupon rate of 5%? Does this bond trade at a discount, at par, or at a premium???

Note:

Assume annual compounding.

Answer rating: 100% (QA)

To find the price of the twoyear defaultfree security we can use the concept of present value Since ... View the full answer