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Consider the following treasury spot rate curve Time to maturity Spot Rate 1 year 3.000% 2 years 4.020% 3 years 5.069% Use a binomial interest
Consider the following treasury spot rate curve
Time to maturity Spot Rate
1 year 3.000%
2 years 4.020%
3 years 5.069%
Use a binomial interest rate tree with the following rates to value a three-year, 3% annual-pay
option-free Treasury bond with a R100 par value. (3)
One-Period Forward Rate in Year
0 1 2
3% 5.7883% 10.7383%
3.8800% 7.1981%
4.8250%
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