5.5 Bond Pricing o calculate the cash price of a bond we discount each cash flow at the appropriate zero rate In our example, the theoretical price of a two year bond providing a 6% coupon semiannually is 0.05×0.5 0.058×1.0 0.064×1.5 e +3e +3e +103e-000×20=9839 Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 5.5 Bond Pricing • To calculate the cash price of a bond we discount each cash flow at the appropriate zero rate • In our example, the theoretical price of a two￾year bond providing a 6% coupon semiannually is 3 3 3 103 98 39 0 05 0 5 0 058 1 0 0 064 1 5 0 068 2 0 e e e e −  −  −  −  + + + = . . . . . . . .