Tuesday, 1 October 2019

Suppose the prices of one-year, two-year, and three-year zero coupon bonds each with a par value of $100

Suppose the prices of one-year, two-year, and three-year zero coupon bonds each with a par value of $100 are $90$, $80, and $70, respectively.
The treasury is considering issuing and three-year par bond. Use the given information on zero coupon bonds, to the coupon rate at which the bond would sell for par (solve for the coupon rate at which the value of the bond equals par).

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