Question
1. Price a 3-year, 3% annual coupon bond, using the following interest rate tree for one-year rates. Assume annual compounding. Par is 100. Both states
1. Price a 3-year, 3% annual coupon bond, using the following interest rate tree for one-year rates. Assume annual compounding. Par is 100. Both states have equal probabilities of happening.
Round your answer to 2 decimal places.
| t = 0 | t = 1 | t = 2 |
| r_2,HH = 2.7183% | ||
| r_1,H = 2.8853% | ||
| r_0 = 1.500% | r_2,HL = 1.6487% | |
| r_1,L = 1.7500% | ||
| r_2,LL = 1.000% |
2. Continuing from the previous question, what is the value of the bond (with coupon payment included) in node r_1,L?
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The Certified Lease And Finance Professionals Handbook
Authors: Deborah Reuben, Certified Lease & Finance Professionals, Equipment Finance Industry Experts
6th Edition
171743388X, 978-1717433886
