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Ho-Lee Model: Time-dependent drift
dr = λₜdt + σdw
r(0) = 4%
Month 1 → 4.661% → Month 2 → 5.305% ↓ 3.506% → 4.15% ↓ ?
What is the value of the missing node [2, 0] in this Ho-Lee interest rate tree?
A
2.447%
B
2.677%
C
2.995%
D
3.256%