Solved

A $100 Face Value One-Year Risk-Free Discount Bond Is Priced

Question 1

Multiple Choice

A $100 face value one-year risk-free discount bond is priced at $95. The two-year discount bond is priced at $90. After one year, the two-year bond will be worth either $91 or $97. The probability of this bond moving to a price of $97 is


A) 0.37
B) 0.50
C) 0.58
D) 0.62

Correct Answer:

verifed

Verified

Related Questions

Q2: A $100 face value one-year risk-free discount

Q3: A $100 face value one-year risk-free discount

Q4: If we use the Black-Scholes model for

Q5: The term "no-arbitrage" class of term-structure models

Q6: In the Black-Scholes formula, interest rates are

Q7: Suppose that the one-year and two-year zero-coupon

Q8: In the Black-Scholes framework, return volatility is

Q9: "Equilibrium" models of the term-structure <br>A) Are

Q10: Which of the following is not sufficient

Q11: "No-arbitrage" models of the interest rate differ