Using the binomial tree of short rates and prices for the unit bond that matures at...
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Using the binomial tree of short rates and prices for the unit bond that matures at T=4, complete the tree by computing the bond prices for bonds with maturities 1, 2, 3 at each node where such prices exist, assuming that the time step is one year, t = 1: 0.6670 10% 7 0.7605 9% 0.7015 116 0.8034 8% V 0.8622 10% 0.8203 10% 0.7376 12% 0.9034 0.8401 0.9103 0.9754 0.9651 0.8903 0.7944 0.8658 For example, on node 0.7605 at t-1, it reads off that B(1.4)-0.7605 and the one period interest rate is 9% Calculate B (1.2) and B (1.3) on the node Using the binomial tree of short rates and prices for the unit bond that matures at T=4, complete the tree by computing the bond prices for bonds with maturities 1, 2, 3 at each node where such prices exist, assuming that the time step is one year, t = 1: 0.6670 10% 7 0.7605 9% 0.7015 116 0.8034 8% V 0.8622 10% 0.8203 10% 0.7376 12% 0.9034 0.8401 0.9103 0.9754 0.9651 0.8903 0.7944 0.8658 For example, on node 0.7605 at t-1, it reads off that B(1.4)-0.7605 and the one period interest rate is 9% Calculate B (1.2) and B (1.3) on the node
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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