DSquaredSlim

Backwards induction man...don't need to use rates in the final year. You know the final year value of the bond. Unless I'm totally misunderstanding what you're saying. Go review CFAI Reading 56 Questions 27-32, that helped me out a ton.

alanfung86 Wrote:
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> in the question, it says that it can be called 1
> year from today. so that justifies why it wouldn't
> go down to 101 today because it can't be called
> yet.
>
> my question on this question is why are the rates
> in year 3 not used? the answer starts the
> calculation directly from the rates in year
> 2...did i horribly miss something?
>
> any help appreciated. thanks.