Instructions Term Structure Models 3119465

Questions 1-6should be answered by building ann=10-period binomial model for the short-rate,ri,j?. The lattice parameters are:r0,0 = 5%,u= 1.1, d = 0.9 andq = 1 – q = 1/2.
1.Question 1
Compute the price of a zero-coupon bond (ZCB) that matures at timet=10and that has face value 100.
Submission Guideline:Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.
2.Question 2
Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at timet=4.
Submission Guideline:Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.
3.Question 3
Compute the initial price of a futures contract on the same ZCB of the previous two questions. The futures contract has an expiration oft=4.
Submission Guideline:Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.

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