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Submitted Jul 3 1 at 2 : 1 6 pm Question 1 0 0 pts Suppose the 1 - year spot rate is 1 %

Submitted Jul 31 at 2:16pm
Question 1
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Suppose the 1-year spot rate is 1%, and that a 2-year 2.5% annulas coupon, a 3-year 3% annual coupon bonds are trading at par ($100)
Calibrate a 2-year binomial interest rate model, assuming that interest volatility sigma is 15%. What is the highest rate at t=2?
Assume annual compounding. Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
0.0538(with margin: 0.001)
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