Problem:
A US Government 2-year T-Note has a face value of $1,000 and pays annual coupons of $70. The first coupon is due in one year. What is the correct price for the coupon bond today? Use the term structure of interest rates shown below.
| Term |
Spot Rate |
| 1-year |
5.5% |
| 2-years |
9.0% |
The correct price for the coupon bond today is $______.
Note: Explain all calculation and formulas.