Hi,
Can anyone help me with the below question from Reading 54, I dont know where the numbers in the denominator came from, thanks
39 -The value per 100 of par value of a two-year, 3.5% coupon bond, with interest payments paid annually, is closest to:
A 101.58. B 105.01. C 105.82.
B is correct. The value per 100 of par value is closest to105.01. Using the forward curve, the bond price is calculated as follows: 3.5 / 1.0080 + 103.50 / ( 1.0080 + 1.0112) = 3.47 + 101.54 = 105.01