Assume a Binomial Pricing Model Where There Is an Equal

question 103

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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Biopsychosocial Approach

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