Valuation an option-free bond with the tree, Financial Management

Let us construct a binomial interest rate tree for a 5.5% option free bond taking Table 3 as the binomial interest rate tree. Table 1 shows the various values in the discounting process. The present value of the bond is calculated using backward induction and it is $100.714.

Table 1: Valuing an Option Free Bond

2379_valuing opton free bond.png

Assumed Volatility = 10%

Coupon rate = 5.5%

Posted Date: 9/10/2012 6:55:04 AM | Location : United States







Related Discussions:- Valuation an option-free bond with the tree, Assignment Help, Ask Question on Valuation an option-free bond with the tree, Get Answer, Expert's Help, Valuation an option-free bond with the tree Discussions

Write discussion on Valuation an option-free bond with the tree
Your posts are moderated
Related Questions
Gross dividend At the ending of the financial year companies will announce the profits or losses that they have earned and a figure for net profit after tax. A company is able

Q. Explain Due Date and Due Diligence? Due Date -Every governing agency and its forms scheduled reporting and most significantly payments have a required due date. It's this

Why are trend analysis and industry comparison important to financial ratio analysis? Trend analysis assists financial managers and analysts see if a company's current financia

How do opportunity costs affect the capital budgeting decision-making process? Opportunity costs imitate the foregone benefits of the alternative not chosen while a capital budge

Q. Dividend Yield plus Growth in Dividend process? Dividend Yield plus Growth in Dividend process: - This process is used to compute the cost of equity capital when the dividen

Why might it be very simple for an investor desiring to diversify his portfolio internationally to buy depository receipts as compared to the actual shares of the company? Answ

Permanent and Temporary Working Capital, I am looking for assignment help on the topic Permanent and Temporary Working Capital. It would be great if anyone help me.

can you help me subtract checks and balances in financial algebra

Question 1 State the key functions of the financial market. Question 2 Define "Bill of exchange". What are its features? Give different types of cheques. Question 3

Explain the terminal value calculation at the end of the forecast period.  Why is it necessary? The organization whose business operation is being valued is not supposed to sudde