A.Calculate the price of a call option using the binomial pricing model and assuming that the short rate follows the FabozziKalotay andWilliams model. The current rate is 6%, mu is .1 and vol is .23. The strike price is 93.75 and the option matures in a year. Your answer should be to the nearest penny.

B.A put option has a strike price of 93 and it matures in a year. Use the binomial option pricing model to find its price. The current one year interest rate is 8% and the 2 year spot rate is 8.3%. Use this information to get the forward rate for next year. Once you have that add 50bpto get the high rate on the tree and subtract 50 bp to get the low rate. Your answer should be rounded to the nearest penny.

C.Use the binomial option pricing model to price a call option with a maturity of one year and a strike price of 96.The current one year rate is 4% and it could either go up to 5% or down to 3%.Each rate has a 50-50 chance of occurring. Your answer should be to the nearest penny.

D.The outstanding balance on a mortgage last month 400,486.08. The scheduled principal payment was 1538.29. The balance is now 394,947.79. After calculating the SMM, use it to get the CPR. Report the CPR as your answer and give it in the form of a decimal out to 3 places. For example, if your answer is .043567 then put in .044.

E.A callable bond has a first call price of 102 and an MD of 7.38.It trades at 101.37to yield 7.8%.Using MD to estimate the price changes, what is the bond's effective duration?Your answer should be to the nearest hundredth.

F.This question asks you to calculate the high and low interest rates in a binomial tree.You will only be asked to give the high interest rate here.The current short rate is 2.2%.Assume its process is described by the Fabozzi, Kalotay and Williams model and that the volatility is .24 and the drift is .03. What is the high rate to the nearest basis point? If your answer is 10.53% then enter 10.53 not .1053 or 1053.

G. A put option on a bond has a strike price of 1041/8 (104.125).The bond has a MD of 17.97 and a YTM of 3.5%.The bond currently trades at 109.24. What yield would make the put option be at the money? (Use MD to get your answer,)