Question: Quiz instructions Construct an = 10 - period binomial model for the short -rate , rij . The lattice parameters are : ro o =

Quiz instructions Construct an = 10 - period binomial model for the short -rate , rij . The lattice parameters are : ro o = 5% , 4 = 1 . 1 , d = 0 . 9 and 9 = 1 - 9 = 1/2 . This is the same lattice that you constructed in Assignment 5 Assume that the 1 - step hazard rate in node ( 1 1 ) is given by hij = ab j - iz where a = 0 0land b = 1 01 . Compute the price of a zero - coupon bond with ace value F = 100 and recovery R = 20 % Submission Guideline : Give your answer rounded to two decimal places For example , if you compute the answer to be 73 2367 , submit 73.24

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