should be answered by building an n =10-period binomial model for the short-rate, r_{i,j}ri,jThe lattice parameters are:r0,0=5%, u = 1.1, d = 0.9 and q =1q=1/2.

Compute the initial value of a forward-starting swap that begins at t=1, with maturity t = 10 and a fixed rate of 4.5%. (The first payment then takes place at t = 2 and the final payment takes place at t = 11 as we are assuming, as usual, that payments take place in arrears.) You should assume a swap notional of 1 million and assume that you receive floating and pay fixed.)