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0.08 0.07 0.06 0.06 0.05 0.04 Use the annual interest rate lattice above to answer this question. Assume that all interest rates are continuously compounded
0.08 0.07 0.06 0.06 0.05 0.04 Use the annual interest rate lattice above to answer this question. Assume that all interest rates are continuously compounded and risk-neutral probability q=0.5. Suppose that there exists a callable bond that matures in 2 years with a par value of 100 and a coupon rate of 10%. The bond can be called anytime at a price of $108. What is the price of the callable bond? 101.23 106.98 99.45 114.53
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