Assuming that this growth rate will continue into to future

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Construct a trinomial tree for the Ho and Lee model where ???? = 0.025. Suppose that the initial zero-coupon interest rate for a maturities of 0.5, 1.0, and 1.5 years are 6.5%, 7%, and 7.5%. Use two time steps, each six months long. Calculate the value of a zero-coupon bond with a face value of $100 and a remaining life of six months at the ends of the final nodes of the tree. Use the tree to value a one-year European put option with a strike price of 95 on the bond.

Annual dividends of Verizon grew from $1.25 in 2010 to $2.47 in 2016. Assuming that this growth rate will continue into to future, what is the value of Verizon's stock if the required return is 15 percent.

Reference no: EM132061664

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