The Interest Rate Is 9% and There Is No Inflation

The interest rate is 9% and there is no inflation.A bond is available that can be redeemed either after one year or after two years.If it is redeemed after one year, the investor gets $109.If it is redeemed after two years, the investor gets $115.54.The investor gets no other payments than what she receives when she redeems the bond.In equilibrium, investors will be willing to pay more than $100 for this bond.