Compute the initial price of a swaption that matures at timet=5and has a strike of 0. The underlying swap is the same swap as described in the previous question with a notional of 1 million. To be clear, you should assume that if the swaption is exercised att=5then the owner of the swaption will receive all cash-flows from the underlying swap from timest=6tot=11inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)

n=10-period binomial model for the short-rate,ri,j. The lattice parameters are:r0,0=5%,u=1.1,d=0.9andq=1q=1/2.