Question

The price of a zero-coupon bond (ZCB) that matures at time t=10 and that has face value 100 is $61.62

Build an n = 10 binomial model lattice model with the following parameters to compute the price of a forward contract on the same ZCB where the forward contract matures at time t = 4

r_0,0 = 5%

u = 1.1

d = 0.9

q = 1 - q = ½

Answer 1

Answer:

Essentially, in any case, the cost of a bond is the entirety of the current estimations of all normal coupon installments in addition to the current estimation of the standard incentive at development.

Ascertaining bond cost is basic: all we are doing is limiting the known future money flows.The cost of a security rises to the current estimation of future premium installments in addition to the current estimation of the presumptive worth (which is returned at maturity).

The cost of a security rises to the current estimation of future premium installments in addition to the current estimation of the assumed worth (which is returned at development).

The cost of a zero-coupon bond (ZCB) that develops at time t = 10t = 10 and that has face esteem 100.$61.622.

The cost of a forward agreement on the equivalent ZCB of the past inquiry where the forward agreement develops at time t = 4t = 4.$77.073.

The underlying cost of a prospects contract on the equivalent ZCB - The fates contract has a lapse of t = 4t = 4.$61.62 and $74.904.

The cost of an American call choice on the equivalent ZCB - The alternative has termination t=6t=6 and strike = 80 = 80.59.705.