Consider a structured security of the following type: The purchaser invests 10 lacs in a bond par value 10 lacs and priced at par and in three years gets back the initial investment plus 90% of the increase in market index whose current price is 10450. The interest rate is 7% per year, continuously compounded. Assuming that the security is fairly priced, what is the implied volatility of the market index?

Answer rating: 100% (QA)

data initial investment 1000000 current market price 10... View the full answer