Question:

Calculate the discount factor and determine the price for the structured product using the discount factor calculated.

You are given a structured product to price. The structured product is a collection or combination of these two financial assets: Asset alpha and Asset omega, with predicted future cashflows as shown below. D B Discount Factor 1 Asset omega A Tenor (Year) 1 2 2 3 Asset alpha $100,000 $200,000 $300,000 $400,000 $500,000 4 3 5 6 4 5 $1,000,000 7 8 Interest Rate 9 3%