Price a 3-year, 3.9% annual coupon, $1000 par bond putable at par in year 1 and year 2, using the following calibrated interest rate model. Assume annual compounding. Round your answer to 2 decimal places. t=0 r_0 = 1.1% t=1 r_1,H= 3.2% r_1,L= 2.4% t=2 r_2,HH = 6.6% r_2,HL= 3.2% r_2,LL = 2.9%

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Price a 3-year, 3.9% annual coupon, $1000 par bond putable at par in year 1 and year
2, using the following calibrated interest rate model.
Assume annual compounding. Round your answer to 2 decimal places.
t = 0
r_0 = 1.1%
t = 1
r_1,H= 3.2%
r_1,L= 2.4%
t = 2
r_2,HH = 6.6%
r_2,HL = 3.2%
r_2,LL = 2.9%
Transcribed Image Text:Price a 3-year, 3.9% annual coupon, $1000 par bond putable at par in year 1 and year 2, using the following calibrated interest rate model. Assume annual compounding. Round your answer to 2 decimal places. t = 0 r_0 = 1.1% t = 1 r_1,H= 3.2% r_1,L= 2.4% t = 2 r_2,HH = 6.6% r_2,HL = 3.2% r_2,LL = 2.9%
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