What is expected return and volatility for a 10 year bond

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Reference no: EM131241213

Suppose that the (CIR) process for short-rate movement in the risk-neutral world is

and the market price of interest rate risk is λ.

(a) What is the real world process for r?

(b) What is the expected return and volatility for a 10-year bond in the risk-neutral world?

(c ) What is the expected return and volatility from a 10-year bond in the real world?

Reference no: EM131241213

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