Question: The one-year, two-year, and three-year spot rates are all 5.00%. Consider a three-year bond with a coupon rate of 8% and a par value of

The one-year, two-year, and three-year spot rates are all 5.00%. Consider a three-year bond with a coupon rate of 8% and a par value of $1000.

(a) At what price should this bond sell?

(b) What is the yield to maturity of this bond. Briefly explain your answer.

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