Year 1 1.200% 2.600% 4.000% Year 2 2.600% 102.600% 4.000% 2.618% 4.057% Year 3 US Treasuries Current YTM YTM=>Cashflow2yr YTM=>Cash Flow3yr CF=>Spot Rates SpotRates->FwdRates 4.000% 104.000% 4.078% 7.058% 1.200% 1.200% 21 Given the above market rates, what would a 3-Year 4% annual risk free bond be worth? 96.20 102.83 92.40 97.28 100.00 Using a 50%: 50% probabilities binary-interest-rate-tree model, and the following assumptions 1.200% 4.000% rH = 4.694% volatility- 8% 22 Calculate the price of the 2-year 3.5% option-free bond 101.47 101.29 99.44 103.00 101.24