Interest rate question

mercredi 24 septembre 2014

Hey guys, this might be very simple but I just need some help understanding.



Assume (p^star)=.5,

ro=.065

ru=.082

rd=.054

ruu=.099

rud=.076

rdu=.065

rdd=.05.



On ruu, top to bottom shows interest rate, bond price, yield at each node of $1 bond maturing at T=3.



.099

.909918

.099



can someone please explain to me how to get these numbers?



Also, I'm kind of confused on term, P(0,2) time 0 maturing at time 2?





Interest rate question

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