Question: Consider a coupon bond with face value M = 100 and time to maturity n = 2. The bond is puttable at par at

Consider a coupon bond with face value M = 100 and time to maturity n = 2. The bond is puttable at par at For problems use the following risk adjusted interest-rate tree: = 2% Y 41 uu y = = 2.5%, y = 1.5% ud dd 3%,

Consider a coupon bond with face value M = 100 and time to maturity n = 2. The bond is puttable at par at time 1. Assume an OAS of 0.10%. Calculate the coupon C such that the puttable bond trades at par. (Use the Goal Seek Excel function.) Also, compute the z-spread and the option cost. For problems use the following risk adjusted interest-rate tree: = 2% Y 41 uu y = = 2.5%, y = 1.5% dd 3%, yud - 2%, ydd = 1% =

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