CFAI online Fixed Income-Wingaersheek Arbitrage Opportunities Case Scenario

Good day!

May I ask Q. Using the backward induction method and the data in Exhibit 2, the value of the bond Hake has been asked to value is closest to:

In the solution it says the following for Time 2 value, but why we don’t add the coupon payment of $4 to 99.522/100.726/101.612? Isn’t it making more sense to include the coupon into the valuation?

Official solution:

[ We calculate the present value of the bond at Time 2 using the three forward rates found in Exhibit 2:

104/1.0450 = 99.522

104/1.0325 = 100.726

104/1.0235 = 101.612

Thanks for your help in advance!

Just look closely, the coupon payment was added.

Thank you, sydneyguy! yup, figured.

You are welcome.