Posted by **Robbie** on Sunday, December 4, 2011 at 7:25am.

The current term-structure of spot interest rates for safe zero-coupon bonds is as follows:

Maturity, in years

Interest rate(r)

1 8%

2 10%

3 11%

4 12%

5 13%

There is a safe bond B which has 4 years before maturity and pays a coupon

of 12% at regular annual intervals and a face value of $100 at maturity.

(a) What will be the current price of bond B?

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