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A callable bond with an 8.2 percent annual coupon will mature in two years at par value. The current one-year spot rate is 7.9 percent. For the second year, the yield-volatility model forecasts that the one-year rate will be either 6.8 or 7.6 percent. The call price is 101. Using a binomial interest rate tree, what is the current price? A. 100.99. B. 100.558. C. 100.279. D. 99.759. |