In the Ho & Lee (1986)model,assume that the initial curve of zero-coupon rates for one and two years is 6% and 7%,respectively.Assume that the probability of an upshift in discount functions is equal to that of a downshift.If the parameter $\delta = 0.95$ ,then the price of a one-year maturity call option on a two-year $100 face value zero-coupon bond in the up node after one year at a strike of $92 will be
A)1.10
B)1.20
C)1.30
D)1.40

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The Answer of In the Ho & Lee (1986)model,assume that the initial curve of zero-coupon rates for one and two years is 6% and 7%,respectively.Assume that the probability of an upshift in discount functions is equal to that of a downshift.If the parameter $\delta = 0.95$ ,then the price of a one-year maturity call option on a two-year $100 face value zero-coupon bond in the up node after one year at a strike of $92 will be
A)1.10
B)1.20
C)1.30
D)1.40

In the Ho & Lee (1986)model,assume That the Initial Curve δ=0.95\delta = 0.95δ=0.95

In the Ho & Lee (1986)model,assume That the Initial Curve $\delta = 0.95$