Use the Black's model to value a 1 -year European put option on a 10 -year bond.
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Use the Black's model to value a 1 -year European put option on a 10 -year bond. Assume that the current cash price of the bond is \(\$ 125\), the strike price is \(\$ 110\), the 1 -year interest rate is \(10 \%\) per annum, the bond's forward price volatility is \(8 \%\) per annum, and the present value of the coupons to be paid during the life of the option is \(\$ 10\).
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