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ASAP 2. Consider a four-year zero-coupon bond. Use a binomial tree for this calculation. The probability that the rate moves higher is 70%; it moves
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2. Consider a four-year zero-coupon bond. Use a binomial tree for this calculation. The probability that the rate moves higher is 70%; it moves lower is 30%. Note the values differ from the lecture examples. Do not round intermediate values. A. What is the price or value of the bond? Start with node 9 and work your way backward through the tree. B. What is the yield to maturity of the bond? C. What is the four-year discount factor (present value of $1 delivered in the future)? 2. Consider a four-year zero-coupon bond. Use a binomial tree for this calculation. The probability that the rate moves higher is 70%; it moves lower is 30%. Note the values differ from the lecture examples. Do not round intermediate values. A. What is the price or value of the bond? Start with node 9 and work your way backward through the tree. B. What is the yield to maturity of the bond? C. What is the four-year discount factor (present value of $1 delivered in the future)Step by Step Solution
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