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All Three Bonds Pay Interest Annually

Question 3

Multiple Choice

 The following information relates to Questions 1517 Bond  Coupon Rate  Time-to-Maturity  Time-to-Maturity  Spot Rates X8%3 years 1 year 8%Y7%3 years 2 years 9%Z6%3 years 3 years 10%\begin{array}{l}\text { The following information relates to Questions } 15 - 17\\\begin{array} { l c c c c } \hline \text { Bond } & \text { Coupon Rate } & \text { Time-to-Maturity } & \text { Time-to-Maturity } & \text { Spot Rates } \\\hline \mathrm { X } & 8 \% & 3 \text { years } & 1 \text { year } & 8 \% \\\mathrm { Y } & 7 \% & 3 \text { years } & 2 \text { years } & 9 \% \\\mathrm { Z } & 6 \% & 3 \text { years } & 3 \text { years } & 10 \% \\\hline\end{array}\end{array}
All three bonds pay interest annually.
-based upon the given sequence of spot rates, the price of bond Y is closest to:


A) 87.50.
B) 92.54.
C) 92.76.

Correct Answer:

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