What is the difference in the price of the bond

Reference no: EM132166583

Question - Imagine that you are trying to price a default-free bond with a 9% coupon using the binomial interest rate model. Assume that u = 1.1 and d = 0.95 and that the current one year spot rate is 10%. Use a three period binomial interest rate model to price this bond. Now, assume that the bond is callable and that the call price is 98. What is its price? What is the difference in the price of the bond under these two conditions?

Reference no: EM132166583

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