Question #57

Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options - Anwers

PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options - Anwers.pdf

Page: 25

Status: Unattempted

Part of Context Group: Q56-57
Shared Context
- Which of the following represent the correct value that should be within the tree in the place marked by D? A) 102.000. B) 101.723. C) 101.000. Explanation Lower of F (101.723) and the call price in two years' time of 101. (Module 27.2, LOS 27.f)
Question
Which of the following represent the correct value that should be within the tree in the place marked by G?
Answer Choices:
A. 96.352
B. 102.000
C. 102.576. Explanation Make sure to use the lower of the call price or calculated value for lower node in year 2 (i.e., $101). G = {(101 + 100.27) / 2 + 6.50} / (1.044448) = 102.57 (Module 27.6, LOS 27.k)
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