What Is the Price of a 2-Year Maturity Bond with a 5

Multiple Choice

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

A) $1,092.97
B) $1,054.24
C) $1,028.51
D) $1,073.34
E) None of the options are correct.