What are the 1-, 2-, 3-, 4-, and 5-year zero-coupon bond prices implied by the two trees?

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What are the 1-, 2-, 3-, 4-, and 5-year zero-coupon bond prices implied by the two trees?
For the next four problems, here are two BDT interest rate trees with effective annual interest rates at each node.

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Derivatives Markets

ISBN: 978-0321543080

4th edition

Authors: Rober L. Macdonald

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Question Posted: Dec 18, 2015 05:18 AM

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What are the 1-, 2-, 3-, 4-, and 5-year zero-coupon bond prices implied by the two trees?

Question:

Tree #1 0.08000 0.07676 0.08170 0.07943 0.07552 0.10362 0.10635 0.09953 0.09084 0.13843 0.12473 0.10927 0.15630 0.13143 0.15809 Tree #2 0.08000 0.08112 0.08749 0.0826 0.07284 0.09908 0.10689 0.10096 0.08907 0.13060 0.12338 0.10891 0.15078 0.13317 0.16283

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See Table 2 for the bond prices which are the same for the two trees The oneyear bonds are simply ...View the full answer

Derivatives Markets

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