Question: 1. The binomial interest rate tree for valuing a bond with a maturity of up to four years is shown below. Attach/show your work. a

1. The binomial interest rate tree for valuing a bond with

a maturity of up to four years is shown below. Attach/show your

1. The binomial interest rate tree for valuing a bond with a maturity of up to four years is shown below. Attach/show your work. a Find the value of the option-free bond b Find the value of the callable bond c] Find the value of the embedded call option Callable Bond Valuation Binomial Interest Rate Tree Years To Maturity 4 Coupon Rate 6.50% 1 Periods/Year Face Value IS] 100 Coupon 'C' 6.5 Year 0 Year 1 Year 2 Year 3 Call Schedule N/A 102 101 100 Interest Rate Tree 3.5000% 5.4289% 7.0053% 9.1987% 4.4448%% 5.7354% 7.5312% 4.6958% 6.1660% 5.0483%

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