Suppose That All Investors Expect That Interest Rates for the 4

Multiple Choice

Suppose that all investors expect that interest rates for the 4 years will be as follows: $\begin{array}{ll}\text { Year } &\text { Forward Interest Rate }\\ 0 & 4\% \text { (today) } \\1 & 5\% \\2 & 6\%\\3&7\%\end{array}$ What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? (Par value = $1,000)

A) $1,092
B) $1,054
C) $986
D) $1,103
E) None of the options are correct.