Arizona State University FIN FIN MISC YOUR BANK is thinking to issue a regular coupon bond (debenture) with following particulars: Maturity = 4 years , Coupon rate = 9.000%, Face value =…
, Coupon rate = 9.000%, Face value = $1,000.00, Coupon payments are annual at the end of year.
In the fixed-income securities market, the yield curve for a bond with a similar default risk characteristics as one issued by YOUR BANK, is upward-sloping with the following interest rates per annum continuously compounded:
R,0,1 = 8% R,0,2 = 9% R,0,3 = 10% R,0,4 = 10.250% R,0,5 = 11.5%
Where, the notation R is the spot-interest rate (at time t=0) for T year maturity zero-coupon bond. What should be the issue (offer) price per bond of YOUR BANK in US dollars?
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