So I got a little confused with two problems in reading 36 (the arbitrage-free valuation models), problems 10 an 14 in the curriculum. Both bonds are valued by using binomial tree model and they have three year maturity.
In problem 10 they start off with start off by discounting last year cash flow (par + coupon)/forward rate + coupon In problem 14 they actually start off by not discounting these values; rather, they represent third year cash flow simply as par + coupon.
Admittedly, CFAI did not provide us with forward rates in t=3 (problem 14) but I am confused what is going on. I am also tired from studying so a little boost from someone would help a lot.