Question: QUESTION 12 Using the binomial model (which assumes that one-year rates undergo a lognormal random walk with volatility ), if is assumed to be 10%,

QUESTION 12 Using the binomial model (which assumes that one-year rates

undergo a lognormal random walk with volatility ), if is assumed to

QUESTION 12 Using the binomial model (which assumes that one-year rates undergo a lognormal random walk with volatility ), if is assumed to be 10%, what is the lower one-year forward rate one year from now given that the higher one-year forward rate one year from now is 1.80% ? A. 1.474% B. 1.247% C. 1.10% D. 1.747%

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