A Multiperiod Binomial Interest Rate Derivative Pricing Model

question 1

Multiple Choice

A multiperiod binomial interest rate derivative pricing model:

• A) has a vector of zero-coupon bonds evolving over time which are used for pricing derivatives
• B) requires only a spot rate evolving over time for pricing derivatives
• C) requires a money market account to earn a constant rate of interest across time
• D) requires a stock whose value goes up in the "up state" and down in the "down state"
• E) None of these answers are correct.

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