The assumed annual volatility for a binomial tree is increas…
The assumed annual volatility for a binomial tree is increased from 10% to 15% due to heightened investor uncertainty about the path of interest rates. When an analyst updates the binomial tree to reflect the higher volatility of 15% (assuming the yield curve remains unchanged), what is the most likely effect on the interest rate nodes in Year 1 (r1,H and r1,L)?