Multiple choice Q: Using a 50%; 50% probabilities binary-interest-rate-tree model, and the following assumptions: r0 = 1.000%,
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Multiple choice Q:
Using a 50%; 50% probabilities binary-interest-rate-tree model, and the following assumptions: r0 = 1.000%, rL = 2.500%, rH =2.993%, volatility = 9%. Calculate the price of the 2-year 4% option-free bond.
Answer from one of the following:
102.10
104.18
105.70
103.98
103.94
Expert Answer:
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