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Compute the price of a pure discount bond

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Assume today is 01/01/98. The yield compounding frequency is annual. A risk free pure discount bond with face value $1,000 maturing on 12/31/98 is selling today at $940. The forward rate for the period 01/01/99 to 06/30/99 is 7%, and the forward rate for the period 06/30/99 to 12/31/99 is 7.5%. Compute the price of a pure discount bond maturing on 12/31/99, with $1,000 face value.

Reference no: EM132538755

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