Assume that spot interest rates are as follows:

Maturity (Year)	Spot Rate (%)
1	3.0%
2	3.5%
3	4.0%
4	4.5%

Compute the price of a bond with coupon rate 5% and 2 years to maturity.

• $100
• $101
• $103
• $105
• $107

References

Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.

Solution: C

Price equals

[[math]]\frac{5}{1.03^1}+\frac{105}{1.035^2}=\$ 102.87 [[/math]]

References

Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.