CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

In the binomial interest rate tree, if i1, L is 2%, and the assumed volatility of the one year rate is 20%, i1, H is:

A. 2.4%
B. 2.44%
C. 2.98%
Correct Answer: C

i1, H = i1, Le

User Contributed Comments 4

User Comment
yuriy The tree is a set of possible interest rate paths that are used to value bonds with a binomial model.
ashish100 Can some explain how to calculate that? Thank you.
ashish100 (.4 2nd ln ) * 2
davidt87 just to clarify ashish means 0.02. dunno why you guys like switching between decimals and non decimals to represent percentages
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