1st question: Reading 56 page 305: “Exhibit 12 shows the adjusted tree by shifting the yield curve up by an arbitrarily small number of basis points, 25 basis points, and then adding 35 bps (the OAS) to each 1-year rate.” However, exhibit 11 interest rates + 25bps + 35bps does not equal the interest rates in exhibit 12. Is it a different way to calculate the new yields? 2nd question: Page 309 Practice Question 5: “using the binomial interest rate tree base on 20% volatility, show that the value of this potable bond is 106.010.” How do we calculate this value with the only interest rate trees of 10% volatility given? In other words, how do we turn the 10% volatility interest rate tree into a 20% volatility interest rate tree? Thanks very much

I remember from last year that the numbers were accurate.

So CP you are saying that technically that each individual yield PLUS 25bps PLUS 35bps IS the right way to calculate the new yields? If you can confirm that would solve one question! Then that leaves me with question number two if you can help with that. Appreciate it.

it says in the text that you do not have to calculate the IR trees, only to know how to value a bond with the given data.