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You are constructing a binomial interest rate tree assuming a lognormal random walk model for interest rates. You estimate a one-year volatility parameter of =14.46%.

You are constructing a binomial interest rate tree assuming a lognormal random walk model for interest rates. You estimate a one-year volatility parameter of image text in transcribed =14.46%. If your tree has the lower 1y1y forward rate at 3.83%, what would be the higher 1y1y forward rate?

Enter answer in percents.

Correct answer: 5.11

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