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Binomial Interest Rate Tree for Putables

The document presents a Binomial Interest Rate Tree model for a 3-year coupon bond, detailing parameters such as the one-year rate, implied yield volatility, and coupon rate. It includes clean prices for various scenarios over the three years, with inputs highlighted for educational adjustments. The content is protected under copyright and intended solely for educational purposes by CFI Education Inc.

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6 views

Binomial Interest Rate Tree for Putables

The document presents a Binomial Interest Rate Tree model for a 3-year coupon bond, detailing parameters such as the one-year rate, implied yield volatility, and coupon rate. It includes clean prices for various scenarios over the three years, with inputs highlighted for educational adjustments. The content is protected under copyright and intended solely for educational purposes by CFI Education Inc.

Uploaded by

G Something
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Binomial Interest Rate Tree

Table of Contents
#VALUE!

Notes
This Excel model is for educational purposes only and should not be used for any other reason.
All content is Copyright material of CFI Education Inc.
https://corporatefinanceinstitute.com/

© 2020 CFI Education Inc.


All rights reserved. The contents of this publication, including but not limited to all written material, content layou
No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any form by a
without prior written permission of the publisher, except in the case of certain noncommercial uses permitted by
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d to all written material, content layout, images, formulas, and code, are protected under international copyright and trademark laws.
ibuted, or transmitted in any form by any means, including photocopying, recording, or other electronic or mechanical methods,
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Binomial Interest Rate Tree


Binomial Interest Rate Tree for a 3 year coupon bond Year = 0

One year rate today 0.90%


Implied yield volatility 10%
Term 3 Years N0 $99.27
Par Value $100 r0 0.90%
Coupon 1.00% Per annum
e 2.718

Clean Prices

3 NP 1 berm w/ 10% volatility Year = 0

One year rate today 0.90%


Implied yield volatility 10%
Term 3 Years N0 $100.10
Par Value $100 r0 0.90%
Coupon 1.00% Per annum
e 2.718

Clean Prices
Note: Cells colored blue are inputs and can be adjusted.

This file is for educational purposes only. E&OE

Corporate Finance Institute®


https://corporatefinanceinstitute.com/
Year = 1 Year = 2 Year = 3

NHHH $101.00
rHHH 1.00%
NHH $99.89
rHH 2.13%
NH $99.88 NHHL $101.00
rH 1.21% rHHL 1.00%
NHL $100.27
rHL 1.75%
NL $100.44 NHLL $101.00
rL 0.99% rHLL 1.00%
NLL $100.58
rLL 1.43%
NLLL $101.00
rLLL 1.00%

H $98.88 HH $98.89
HL $99.27
L $99.44 LL $99.58

Year = 1 Year = 2 Year = 3

NHHH $101.00
rHHH 1.00%
NHH $99.89
rHH 2.13%
NH $101.00 NHHL $101.00
rH 1.21% rHHL 1.00%
NHL $100.27
rHL 1.75%
NL $101.00 NHLL $101.00
rL 0.99% rHLL 1.00%
NLL $100.58
rLL 1.43%
NLLL $101.00
rLLL 1.00%

H $98.88 HH $98.89
HL $99.27
L $99.44 LL $99.58

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