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Basic Question 7 of 9

In the binomial interest rate tree, if i1, L is 3%, and the assumed volatility of the one year rate is 10%, the implied forward rate is:

A. 3.24%
B. 3.33%
C. 3.66%
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User Contributed Comments 2

User Comment
BMarf (3% + 3.66%) / 2 = 3.33%
davidt87 [(2 * 0.1) 2ndLN] * 0.03 = 0.0366
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes

Barnes

Learning Outcome Statements

describe a binomial interest rate tree framework;

CFA® 2025 Level II Curriculum, Volume 4, Module 27.