Question
In a binomial world. You are long in a corporate bond.Maturity is 2 yrs, 8% coupon (annual pay).Callable in 1 year at 98.Current 1 year
In a binomial world. You are long in a corporate bond.Maturity is 2 yrs, 8% coupon (annual pay).Callable in 1 year at 98.Current 1 year spot rate is 10%.There is 50% probability that the interest rate next year could rise by 10% or fall by 10%.What is the current price?
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Forecasting Methods And Applications
Authors: Spyros G. Makridakis, Steven C. Wheelwright, Rob J Hyndman
3rd Edition
0471532339, 9780471532330
