Question 2(Pricing swaptions using term structure model) Consider an n=n=n, equals10-period binomial model for the short-rate, ri,jri,jr, start subscript, i, comma, j, end subscript. The lattice parameters are: r0,0=5%r0,0=5%r, start subscript, 0, comma, 0, end subscript, equals, 5, percent, u=1.1u=1.1u, equals, 1, point, 1, d=0.9d=0.9d, equals, 0, point, 9 and q=1q=1/2q=1q=1/2q, equals, 1, minus, q, equals, 1, slash, 2. Compute the initial price of a swaption that matures at time t=5t=5t, equals, 5 and has a strike of 0. The underlying swap is the same swap as described in the previous question with a notional of 1 million. To be clear, you should assume that if the swaption is exercised at t=5t=5t, equals, 5 then the owner of the swaption will receive all cash-flows from the underlying swap from times t=6t=6t, equals, 6 to t=11t=11t, equals, 11 inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)