Questions 1-6 should be answered by building an n =n=10-period binomial model for the short-rate, r_i,jri,j?. The lattice parameters are: r_0,0 = 5%r0,0?=5%, u = 1.1u=1.1, d = 0.9d=0.9 and q =1-q = 1/2q=1-q=1/2.Compute the initial price of a futures contract on the same ZCB of the previous two questions. The futures contract has an expiration of
t = 4t=4.
mpute the price of a zero-coupon bond (ZCB) that matures at time t = 10t=10 and that has face value 100.
Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.
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