Question: Consider the following "rate" tree, which gives the evolution of ½-year rates. The risk-neutral probabilities are 0.5.
Time 0 Time 1/2 Time 1
6.910%
5.999%
5.535% 5.432%
4.716%
4.270%
Construct the corresponding price tree for the ½-year zeros, 1-year zeros and the 1½-year zeros.