Hello Folks,
Spent too much time on this, and need your brains!
Page 287 of the CFAI shows that the bond value at a node = .5 x (VH+C/(1+i) + (VL+C/(1+i) However, the explanation to EOC question #10 on reading 44 shows the value as : .5 x (VH/(1+i) + VL/(1+i) + 5 I am thouroughly confused about the coupon payment! Is this an error or am I just plain silly? When would we add the coupon to the values and discount the High and Low by their respective rates and average vs. taking the values and discount the High and Low by their respective rates, take the average, then add the coupon? Thank you!!!