Question: Question 3 Consider the following information in Table 2, on three default-risk free bonds with annual coupon payments and face value of $1,000. Table 2

Question 3 Consider the following information in Table 2, on three

Question 3 Consider the following information in Table 2, on three default-risk free bonds with annual coupon payments and face value of $1,000. Table 2 Bond Coupon rate (%) Time to maturity (years) A 4 Yield to maturity (%) 5 1 B 6.5 2 6 8 3 8 (3 marks) (c) Demonstrate how you can use bonds A, B and C to replicate a 3-year zero coupon bond with a face value of $1,000. (6 marks) O TETE SA (e) Assume. Verong

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