-What Should the Purchase Price of a 2-Year Zero Coupon

Multiple Choice

$$\begin{array} { l | l } \underline { Y e a r } & \underline { 1 - Y e a r } \text { Forward Rate } \\\hline 1 & 5 \% \\\hline 2 & 5.5 \% \\\hline 3 & 6.0 \% \\\hline 4 & 6.5 \% \\\hline 5 & 7.0 \% \\\hline\end{array}$$
-What should the purchase price of a 2-year zero coupon bond be if it is purchased at the beginning of year 2 and has face value of $1,000?

A) $877.54
B) $888.33
C) $883.32
D) $894.21
E) $871.80