2. Using binomial interest rate trees, fill out the table below. (60 points) The first five columns are inputs. CR and F

[answerhappygod]

2 Using Binomial Interest Rate Trees Fill Out The Table Below 60 Points The First Five Columns Are Inputs Cr And F 1 (264.72 KiB) Viewed 32 times

2. Using binomial interest rate trees, fill out the table below. (60 points) The first five columns are inputs. CR and Face are, respectively, the coupon rate and face value of a one-year coupon bond. y is the six- month spot rate today; we called this Oy0.5 in class. y^H is the six-month-in-six- month spot rate at the High node; we called this 0.5y0.5^H in class. y^L is the six-month-in-six-month spot rate at the Low node; we called this 0.5y0.51in class. The last three columns are outputs. P is the price of the bond today; we called this PO in class. PAH is the price of the bond at the High node; we called this P0.5^H in class. PAL is the price of the bond at the Low node; we called this P0.5AL in class I have already filled out the first row; it is the example we worked through in class (with minor differences due to rounding). The goal for this exercise is to see how these prices change as the inputs change. CR y^H YAL P PAH PAL 8% 9.952% 8.148% $100.000 $99.070 $99.929 10% 8% Face $100 $100 $125 $100 $100 $100 у 7.000% 7.000% 7.000% 8.750% 7.000% 7.000% 8% 9.952% 9.952% 9.952% 12.440% 9.952% 8.148% 8.148% 8.148% 8.148% 10.158% 8% 8%