A three-year bond with a 10 percent annual

问题单项选择题

A three-year bond with a 10 percent annual coupon has cash flows of $100 at Year 1, $100 at Year 2, and pays the final coupon and the principal for a cash flow of $1100 at year 3. The spot rate for Year 1 is 5 percent, the spot rate for year 2 is 6 percent, and the spot rate for Year 3 is 6.5 percent. What is the arbitrage-free value of the bond（）

A. $975.84.

B. $1094. 87.

C. $962.38.

答案

参考答案：B

解析：

Spot interest rates can be used to price coupon bonds by taking each individual cash flow and discounting it at the appropriate spot rate for that year’s payment. To find the arbitrage-free value:

Bond value=$ 100/1.05+$ 100/1.06²+$1100/1.065³=$ 95.24+$89.00+$ 910.63=$1094.87.