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Q1: Suppose that a = 0.1, b = 0.08 and = 0.015 in Vasiceks model, with the initial value of the short rate being 5%.

Q1: Suppose that a = 0.1, b = 0.08 and = 0.015 in Vasiceks model, with the initial value of the short rate being 5%. Calculate the price of a 1-year European call option on a zero-coupon bond with a principal of 100, that matures in 3-years when the strike price is 87.

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