Just a quick question. What’s the formula to compute the value of a bond using a Binomial tree?
I thought it was ((Upper Bond Price+ Coupon) + (Lower Bond Price + Coupon))*.5 / 1+r
Yet in the EOC questions, the formula seems to be ((Upper Bond Price/1+r + Lower Bond Price/1+r)*.5 + Coupon)
So which one is the good formula?