- CFA Exams
- CFA Exam: Level II 2021
- Study Session 12. Fixed Income (1)
- Reading 33. The Arbitrage-Free Valuation Framework
- Subject 2. Interest Rate Trees and Arbitrage-Free Valuation
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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