I'm stuck on the following problem from a financial maths course, and was wondering whether anybody would be able to help me. I don't really know where to begin.
The following risk free bonds are available.
A. Matures and pays £1 in 6 months, plus a final interest payment of 4p. Costs 102p.
B. Matures in a year and pays £1. Also gives interest payments of 2.5p in 6 months and another 2.5p in a year. Costs 101p.
C. Also matures in a year and pays £1, but gives one final interest payment of 6p.
Assuming all risk free investments over a given period should give the same return, what should C cost?