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The price of a zero-coupon bond (ZCB) that matures at time t=10 and that has face...

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

r0,0 = 5%

u = 1.1

d = 0.9

q = 1 - q = ½

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Expert Solution

Fundamentally, however, the price of a bond is the sum of the present values of all expected coupon payments plus the present value of the par value at maturity. Calculating bond price is simple: all we are doing is discounting the known future cash flows.The price of a bond equals the present value of future interest payments plus the present value of the face value (which is returned at maturity)The price of a bond equals the present value of future interest payments plus the present value of the face value (which is returned at maturity).

The price of a zero-coupon bond (ZCB) that matures at time t=10t=10 and that has face value 100.$61.622.

The price of a forward contract on the same ZCB of the previous question where the forward contract matures at time t=4t=4.$77.073.

The initial price of a futures contract on the same ZCB -The futures contract has an expiration of t=4t=4.$61.62 and $74.904.

The price of an American call option on the same ZCB - The option has expiration t=6t=6 and strike =80=80.59.705.

jeff jeffy answered 1 year ago
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