Assume a Binomial Pricing Model Where There Is an Equal

question 24

Multiple Choice

Assume a binomial pricing model where there is an equal probability of interest rates increasing or decreasing 1 percent per year. What should be the price of a three-year 6 percent floor if the current (spot) rates are also 6 percent? The face value is $5,000,000, and time periods are zero, one, and two.

• A)$44,060.
• B)$66,030.
• C)$22,462.
• D)$21,598.
• E)$25,000.

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Definitions:

Genes

Units of heredity made up of DNA that act as instructions to make molecules called proteins, influencing individual development, behavior, and physical traits.

Self-Regulating

The ability to monitor and control our own behavior, emotions, or thoughts, altering them in accordance with the demands of the situation.

Prenatal Environments

Refers to the physical, chemical, and biological conditions that affect a fetus within the womb.

Placentas

The organ in mammals that connects the developing fetus to the uterine wall, allowing nutrient uptake, waste elimination, and gas exchange via the mother's blood supply.