The price of one-year, two-year, and three-year zero-coupon Treasury bond are currently $980, $860, and...
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The price of one-year, two-year, and three-year zero-coupon Treasury bond are currently $980, $860, and $780 respectively. The government plans to issue a new three-year annual coupon bond with a coupon rate of 4%. The face value of all the bonds are $1,000. What is the fair price of the new coupon bond? (show work)
A. $1000
B. $884.80
C. $780
D. $1,040
E. $860
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