Question
9.32 7.01 5.43 7.76 3.45 5.74 4.45 6.21 4.7 5.03 a) Use the adjacent tree to price a 4-year multi-step up callable bond. The bond
| 9.32 | |||
| 7.01 | |||
| 5.43 | 7.76 | ||
| 3.45 | 5.74 | ||
| 4.45 | 6.21 | ||
| 4.7 | |||
| 5.03 |
a) Use the adjacent tree to price a 4-year multi-step up callable bond. The bond pays a coupon of 4.5% for Year 1, 5.5% for Year 2 and 6.5% for Year 3. The bond is callable at $99 from Year 1 onwards.
b) What is the value of the option
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Global Business Today
Authors: Charles Hill
7th Edition
0078137217, 9780078137211
