Question: Consider a 4% coupon, 3-year bond (remember it pays every 6 months). If the par value is $100, and the spot rates, i.e. the relevant

Consider a 4% coupon, 3-year bond (remember it pays every 6 months). If the par value is $100, and the "spot" rates, i.e. the relevant discount rates are

r.5 = .0042

r1 = .0058

r1.5 = .0065

r2 = .0076

r2.5 = .0081

r3 = .0087

a. What is the price of this bond?

b. What is the YTM of this bond?

c. Is the YTM above, below, or equal to the coupon rate? Does this make sense, given your answer in part (a)? Consider a 4% coupon, 3-year bond (remember it pays every 6 months).

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