today I faced this question:
A 4% coupon bond with three years left to maturity is trading at 96 cents on
the dollar. If the current three-year continuously compounded spot rate is r3 = 5%, at
what price will a newly issued three-year bond with a 5% coupon and the same coupon
structure be offered?
First of all, it’s not a multiple choice question!
I have no idea how to solve this question. Neither information is given regarding the coupon payment frequency nor the spot rates of year 1 or year 2.
Thanks in advance!