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Question Using the binomial tree, determine the value of an 8.5% 3-year option-free bond 5. The on-the-run issue for the Inc.Net Company is snown verow.

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Using the binomial tree, determine the value of an 8.5% 3-year option-free bond

5. The on-the-run issue for the Inc.Net Company is snown verow. Using the bootstrapping methodology, the spot rates are: Assuming an interest rate volatility of 10% for the 1 -year rate, the binomial interest rate tree for valuing a bond with a maturity of up to three years is shown below

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