(Bond market) There are three bonds in the market as follows:. 1. A bond with 4% coupon rate (paid annually), 10 years to maturity, and $1,000 face value
2. A bond with 4% plus current (short) rate (paid annually), 10 years to maturity, and $1,000 face value
3. A bond with 8% minus current (short) rate (paid annually), 10 years to maturity, and $1,000 face value
The prices of the bonds are $950, $1,100, and $900, respectively.
(a) Derive the price of a zero-coupon bond with 10 years to maturity and $1,000 face value.
(b) Derive the price of a floating-rate bond (coupon paid annually) with 10 years to maturity and $1,000 face value.