Question
Price a 3-year, 4% annual coupon, $1000 par bond using the following calibrated model for one-year interest rate. All rates are expressed on a bond
Price a 3-year, 4% annual coupon, $1000 par bond using the following calibrated model for one-year interest rate.
All rates are expressed on a bond equivalent basis. Assume annual compounding. Round your answer to 2 decimal places.
| t = 0 | t = 1 | t = 2 |
| r_2,HH = 0.035 | ||
| r_1,H = 0.023 | ||
| r_0 = 0.013 | r_2,HL = 0.024 | |
| r_1,L = 0.018 | ||
| r_2,LL = 0.02 |
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Finance And Modernization
Authors: Gerald D. Feldman, Peter Hertner
1st Edition
0754662713, 978-0754662716
