Questions 1 and 2 should be answered by building and calibrating a 10-period Black- Derman-Toy model for the short-rate, rij You may assume that the term-structure of interest rates observed in the market place is: Period 1 2 3 4 5 6 7 8 9 10 Spot Rate 3.0% 3.1% 3.2% 3.3% 3.4% 3.5% 3.55% 3.6% 3.65% 3.7% As in the video modules, these interest rates assume per-period compounding so that, for example, the market-price of a zero-coupon bond that matures in period 6 is 25 = 100/(1+.035)6 = 81.35 assuming a face value of 100. Construct a n = 10-period binomial model for the short-rate, rinj. The lattice parameters are: r0,0 = 5%, u = 1.1, d= 0.9 and q = 1- q = 1/2. This is the same lattice that you constructed in Assignment 5. Assume that the 1-step hazard rate in node (i, j) is given by hij = abi- where a = 0.01 and b = 1.01. Compute the price of a zero-coupon bond with face value F = 100 and recovery R= 20%. Submission Guideline: Give your answer rounded to two decimal places. For example, if you compute the answer to be 73.2367, submit 73.24. Please give me a solution to this problem Questions 1 and 2 should be answered by building and calibrating a 10-period Black- Derman-Toy model for the short-rate, rij You may assume that the term-structure of interest rates observed in the market place is: Period 1 2 3 4 5 6 7 8 9 10 Spot Rate 3.0% 3.1% 3.2% 3.3% 3.4% 3.5% 3.55% 3.6% 3.65% 3.7% As in the video modules, these interest rates assume per-period compounding so that, for example, the market-price of a zero-coupon bond that matures in period 6 is 25 = 100/(1+.035)6 = 81.35 assuming a face value of 100. Construct a n = 10-period binomial model for the short-rate, rinj. The lattice parameters are: r0,0 = 5%, u = 1.1, d= 0.9 and q = 1- q = 1/2. This is the same lattice that you constructed in Assignment 5. Assume that the 1-step hazard rate in node (i, j) is given by hij = abi- where a = 0.01 and b = 1.01. Compute the price of a zero-coupon bond with face value F = 100 and recovery R= 20%. Submission Guideline: Give your answer rounded to two decimal places. For example, if you compute the answer to be 73.2367, submit 73.24. Please give me a solution to this