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The price of one-year, two-year, and three-year zero-coupon Treasury bond are currently $980, $860, and...

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Accounting

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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