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  3. 2. (15 points) the price of one-year bond (a) with

2. (15 points) The price of one-year bond (A) with zero coupon and face value...

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2. (15 points) The price of one-year bond (A) with zero coupon and face value 1000 is S 961.5. The price of two-year bond (B) with zero coupon and face value 1000 is S 907. Consider a third bond (C) that has 100 coupon paid annually and face value of $1000. (i) What must be the price of bond C so that the Law of One Price holds. (i) Find YTM of each bond (ii) Find Macaulay duration of each bond. 2. (15 points) The price of one-year bond (A) with zero coupon and face value 1000 is S 961.5. The price of two-year bond (B) with zero coupon and face value 1000 is S 907. Consider a third bond (C) that has 100 coupon paid annually and face value of $1000. (i) What must be the price of bond C so that the Law of One Price holds. (i) Find YTM of each bond (ii) Find Macaulay duration of each bond

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