CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

In the binomial interest rate tree, if i1, H is 4%, and the assumed volatility of the one year rate is 10%, the implied forward rate is:
A. 3.24%
B. 3.48%
C. 3.64%
Explanation: i1, L = i1, H/e = 3.27%. The implied forward rate is the mean of the adjacent two rates.(4% + 3.27%)/2 = 3.64%.

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