You are given a callable bond with a coupon rate of 10%, time to maturity...
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You are given a callable bond with a coupon rate of 10%, time to maturity is 2-years and par value is R100. The call price is 103.00 and the bond is callable after 1-year or at node one. The current 1-year spot rate is 6.5%. For the second year, the yield volatility model forecasts that the one-year rate will be either 3% or 9%. Using the backward induction, determine the value of the bond, choose the closest answer O A. R95.74 O B. R105.13 O C. R97.52 O D. R106.91 You are given a callable bond with a coupon rate of 10%, time to maturity is 2-years and par value is R100. The call price is 103.00 and the bond is callable after 1-year or at node one. The current 1-year spot rate is 6.5%. For the second year, the yield volatility model forecasts that the one-year rate will be either 3% or 9%. Using the backward induction, determine the value of the bond, choose the closest answer O A. R95.74 O B. R105.13 O C. R97.52 O D. R106.91
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