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?
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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