Fixed Income Q40

0. A bond offers an annual coupon rate of 6%, with interest paid quarterly. The bond matures in three years. At a market discount rate of 5%, the price of this bond per $100 of par value is closest to:

Answer
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Option : C
Explanation : Using a financial calculator, compute the present value as:
N = 3 * 4 = 12, I/Y = 5/4 = 1.25%, PMT = 6/4 = 1.5, and FV =100, CPT PV = ($102.76).
Since the coupon rate is higher than the market rate, the bond is trading at a premium.

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