Pricing a bond?
There is a US treasury bond with 2 years to maturity and an annual coupon rate of 3%. Coupons are paid semi-annually. Take another US Treasury bond with 3 years to maturity and the same coupon rate. Assume that the Annual Percentage Rate on 6 month deposits in the US is constant at 3%.
. What are the fair prices of the 2 bonds?
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