- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 27. The Arbitrage-Free Valuation Framework
- Subject 2. The Basics of Creating a Binomial Interest Rate Tree
CFA Practice Question
What is the discount rate in the binomial interest rate tree?
B. forward rate
C. yield to maturity
A. spot rate
B. forward rate
C. yield to maturity
Correct Answer: B
Discount rate is the forward rate associated with the node under analysis.
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