Question: Please show how (E) was derived. 8. (Problem set 2, Q7) You observe the following spot and forward rates in the market yi 796, f2

Please show how (E) was derived. 8. (Problem set 2, Q7)

Please show how (E) was derived.

8. (Problem set 2, Q7) You observe the following spot and forward rates in the market yi 796, f2 = 996, 2f3 = 10%. What is the price of a 10% coupon bond with a face value of $100 and a time-to-maturity of three years? (Please round your calculation to the nearest 2nd decimal.) A. $99.46 B. $100.60 C. $101.74 D. $102.74 E. $103.66 Answer: E

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