Question: 3. Construct a n =10-period binomial model for the short-rate, ri,j. The lattice parameters are: r0,0=5%, u=1.1, d=0.9 and q=1-q=1/2. This is the same lattice

3. Construct a n =10-period binomial model for the short-rate, ri,j. The lattice parameters are: r0,0=5%, u=1.1, d=0.9 and q=1-q=1/2. This is the same lattice that you constructed in Assignment 5. Assume that the 1-step hazard rate in node (i,j) is given by hij=abj1/2 where a =0.01 and b =1.01. Compute the price of a zero-coupon bond with face value F =100 and recovery R =20%. Submission Guideline: Give your answer rounded to two decimal places. For example, if you compute the answer to be 73.2367, submit 73.24.

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