Question: Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the

Assume a binomial pricing model where there is an equal probability

Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the price of a three-year 6 percent floor if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two. $44,060. $66,030. $22,462. $21,598. $25,000. Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the price of a three-year 6 percent floor if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two. $44,060. $66,030. $22,462. $21,598. $25,000

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