Assume Annual Compounding $\sigma = 0.30$ What Are the One-Year Rates (Up and Down) After

question 21

Multiple Choice

Assume annual compounding. The one-year and two-year zero-coupon rates in the BDT model are 6% and 7%. The volatility is given to be $\sigma = 0.30$ . What are the one-year rates (up and down) after one year?

• A) 9.2% and 6.1%
• B) 9.6% and 5.8%
• C) 10.0% and 4.0%
• D) 10.4% and 5.7%

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The assumption that a statement implies the existence of the subject matter it discusses.

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A rhetorical argument where one premise is left unstated but is implied by the context.

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A statement or idea that forms the basis for a logical conclusion, often serving as the starting point of an argument.

Existential Import

The implication that a categorical statement presupposes the existence of the entities it mentions.